You purchased a 20year bond 15 years ago at a yield to maturity of 7.56%. The bond has a face value of $1,000 and a coupon rate of 9.00%, paid semiannually. If the investors’ required rate of return on this bond has stayed the same for 15 years, what is the price of the bond today?

Given about a bond,
it was purchased 15 years ago,
So, years remaining to maturity = 5 years
Yield to maturity = 7.56%
Face value = $1000
coupon rate = 9% paid semiannually,
So, semiannual coupon payment = (9%/2) of 1000 = $45
So, price of the bond today can be calculated on financial calculator using following values:
FV = 1000
PMT = 45
N = 2*5 = 10
I/Y = 7.56/2 = 3.78
compute for PV, we get PV = 1059.04
So, current price of the bond = $1059.04
There must be a misprinting in option D.
Get Answers For Free
Most questions answered within 1 hours.