Question

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

$ 1,127.31

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 8% APR, what will the bond's price be?

Answer 1

a.	Yield to maturity	=rate(nper,pmt,pv,fv)*2
			= 8.12%
	Where,
	nper	=	10*2	=	20
	pmt	=	1000*5%	=	$         50.00
	pv			=	$ -1,127.31
	fv			=	$   1,000.00
b.	Bond's Price	=-pv(rate,nper,pmt,fv)
			= $ 1,135.90
	Where,
	rate	=	8%/2	=	0.04
	nper	=	10*2	=	20
	pmt	=	1000*5%	=	$         50.00
	fv			=	$   1,000.00