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what is the price of a $1000 par value bond with a coupon rate of 10.4%...

what is the price of a $1000 par value bond with a coupon rate of 10.4% (semi-annual payments) that matures in 17 years, assuming bond's YTM is 8.28% p.a.?
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Answer #1

Information provided:

Par value= future value= $1,000

Time= 17 years*2= 34 semi-annual periods

Yield to maturity= 8.28%/2= 4.14% per semi-annual period

Coupon rate= 10.4%/2= 5.2%

Coupon payment= 0.052*1,000= $52

The price of the bond is calculated by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 1,000

N= 34

I/Y= 4.14

PMT= 52

Press the CPT key and PV to compute the present value.

The value obtained is 1,191.58.

Therefore, the price of the bond is $1,191.58.

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