Question

Yan Yan corp. has a $2,000 par value bond outstanding with a coupon rate of 4.9% paid semi-annually and 13 years to maturity. The yield to maturity of the bond is 3.8 percent. What is the value of the bond?

Answer 1

Par value or face value=$2000
Coupon rate is 4.9%, as the interest is paid semiannually, semiannual coupon rate=4.9%/2=2.45%
Coupon payments=Semiannual coupon rate*Face value=2.45%*$2000=$49

Time to maturity=13 years, as the interest is paid semiannually, total number of periods=13*2=26
The bond yield=3.8%, semiannual yield=3.8%/2=1.90%
Using these values in excel, we can calculate the present value of the bond.

Value of the bond=$2,224.04