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 |

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