Question

A corporate bond is 8% 1000$ par, 5 year semi annual. The market rate of return is 10%. What is the price of the bond? show calculation on ti84

Answer 1

Information provided:

Face value= future value= $1,000

Time= 5 years*2= 10 semi-annual periods

Coupon rate= 8%/2= 4%

Coupon payment= 0.04*1,000= $40 per semi-annual period

Yield to maturity= 10%/2= 5% per semi-annual period

The price of the bond is calculated by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 1,000

PMT= 40

I/Y= 5

N= 10

Press the PV key and Alpha Enter to compute the present value.

The value obtained is 922.78.

Therefore, the price of the bond is $922.78