Question
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere...
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Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 20 years to maturity, and a coupon rate of 6.2 percent paid annually. |
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If the yield to maturity is 7.3 percent, what is the current price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
Homework Answers
Answer #1
We have the bond price formula:
Where,
C = Periodic coupon payment,
P = Par value of bond,
r = Yield to maturity
n = No. of periods till maturity
C = 1000 * 6.2% = € 62.00
Substituting the values, we get:
Therefore, current price of the bond is € 886.13
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