Question

A bond has a coupon rate of 3.6% and pays coupons semi-annually. The bond matures in 3 years and the yield to maturity on similar bonds is 4.3%. What is the price of the bond?

Answer #1

Value of the Bond =

Where r is the discounting rate of a compounding period i.e. 4.3%/2 = 2.15% _ _ (Semi Annual)

And n is the no of Compounding periods 3 years * 2 = 6 _ _ (Semi Annual )

Coupon 3.6%/2 = 1.8%

=

= 100.31734018 + 880.17651034

= **980.49385052 OR 980.49**

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