Question

AMD offers 5 percent coupon bonds with semiannual payments and a yield to maturity of 8 percent. The bonds mature in 10 years. What is the market price per bond if the face value is $1,000?

$1,002.60

796.14

$996.48

$891.47

Answer 1

Face Value = $1,000

Semi-annual coupon payment =$1000*5%*1/2

=$25

No of years to maturity = 10

n = 10 years*2 = 20

Yield to Maturity = 8%

Semi-annual YTM =8%/2 = 4%

Calculating the Market price per bond:-

Price = $339.75 + $456.39

Price = $796.14

So, the market price per bond is $796.14

Hence, Option B. $796.14

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