Question

A 10% bond with semi-annual coupons and with face value N$100,000 and redemption amount N$ 98,760...

A 10% bond with semi-annual coupons and with face value N$100,000 and redemption amount N$ 98,760 is issued with the condition that the redemption can take place 15 days after the 20th coupon date. Find the price paid by an investor wishing a minimum yield rate of 12%

Homework Answers

Answer #1

We'll use MS Excel's 'Price' function as shown below in the snippet (assuming settlement date to be today, and maturity after 15 days post 20 coupon payments i.e. 15 days post10 years)

The formula returns the bond price for $100 of face value of bond, which in this case is 88.10892

Since face value here is $100000, so the investor would pay N$88,108.92

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