Question

Suppose a 10-year, $1,000 bond with a 11% coupon rate and semiannual coupons is trading for a price of $945.47.

a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)?

b. If the bond's yield to maturity changes to 10% APR, what will the bond's price be?

Answer #1

Ans:- we will use the RATE and PV function of excel to find the YTM (Yield to maturity) & Bond Price.

For YTM, Nper=10*2=20,Pmt=$1000*11%/2=$55, PV=-$945.47, FV=$1000

For Bond Price, Rate=10%/2, Nper=10*2=20, Pmt=-$1000*11%/2=-$55, FV=-$1000

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