Question

Union Local School District has bonds outstanding with a coupon rate of 4.4 percent paid semiannually and 19 years to maturity. The yield to maturity on these bonds is 3.7 percent and the bonds have a par value of $5,000.

  

What is the dollar price of each bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Price of a bond = Present Value of semi-annual coupons and Face Value discounted at semi-annual YTM.

Number of payments = 19*2 = 38

Face Value =5000

Semi-annual coupon amount = 0.044 *5000/2 = 110

Semi-annual YTM = 3.7/2%

Price of bond = 110/(1+0.0185)^1 + 110/(1+0.0185)^2 + 110/(1+0.0185)^3 + 110/(1+0.0185)^4 + 110/(1+0.0185)^5 + 110/(1+0.0185)^6 + ................110/(1+0.0185)^38 + 5000/(1+0.0185)^ 38

Price of bond = 5474.59 Answer

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