A bond was issued three years ago at a price of $1,040 with a maturity of six years, a yield-to-maturity (YTM) of 5.25% compounded semi-annually, and a face value of $1,000 with semi-annualy coupons. What is the price of this bond today immediately after the receipt of today's coupon if the YTM has risen to 6.50% compounded semi-annually?
Current Price is $ 987.53
| Step-1:Calculation of semi annual coupon payment | ||||||
| Semi annual coupon payment | =pmt(rate,nper,pv,fv) | |||||
| = $ 30.18 | ||||||
| Where, | ||||||
| rate | = | Semi annual discount rate | = | 5.25%/2 | = | 0.02625 |
| nper | = | Semi annual number of period | = | 6*2 | = | 12 |
| pv | = | Price at the beginning | = | $ -1,040.00 | ||
| fv | = | Face Value | = | $ 1,000.00 | ||
| Step-2:Calculation of current Price | ||||||
| Current Price | =-pv(rate,nper,pmt,fv) | |||||
| = $ 987.53 | ||||||
| Where, | ||||||
| rate | = | 6.50%/2 | = | 0.0325 | ||
| nper | = | 3*2 | = | 6 | ||
| pmt | = | $ 30.18 | ||||
| fv | = | $ 1,000.00 |
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