Question

# Settlement date 1/1/2000 Maturity date 1/1/2015 Annual coupon rate 7.00% Coupons per year                  2 a)...

 Settlement date 1/1/2000 Maturity date 1/1/2015 Annual coupon rate 7.00% Coupons per year 2 a) Yield to maturity 8% b) Yield to maturity 10% c) Yield to maturity 12% calculate the price of the bond

Case 1 - YTM = 8%

Annual Coupon rate = 7%

Semi Annual Coupon Rate = 3.5%

Semi Annual Coupon Payment = 35

Number of Years = 15

Number of Semi Annual Periods = 15 * 2 = 30

FV = 1,000

YTM = 8%

Semi Annual YTM = 4%

Using Financial Calculator:

PV = 813.35

Case 2 - YTM = 10%

Annual Coupon rate = 7%

Semi Annual Coupon Rate = 3.5%

Semi Annual Coupon Payment = 35

Number of Years = 15

Number of Semi Annual Periods = 15 * 2 = 30

FV = 1,000

YTM = 10%

Semi Annual YTM = 5%

Using Financial Calculator:

PV = 672.52

Case 3 - YTM = 12%

Annual Coupon rate = 7%

Semi Annual Coupon Rate = 3.5%

Semi Annual Coupon Payment = 35

Number of Years = 15

Number of Semi Annual Periods = 15 * 2 = 30

FV = 1,000

YTM = 12%

Semi Annual YTM = 6%

Using Financial Calculator:

PV = 565.05

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