Question

Weismann Co. issued 18-year bonds a year ago at a coupon rate of 10 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 10 percent, what is the current bond price?

Answer 1

Maturity remaining = 17

Number of periods = 17*2 = 34

Face Value = 1000

Semi-annual Payment = 0.1*1000/2 = 50

Semi-annual YTM = 5%

Current Bond Price = Present Value of semi-annual coupon and face value discounted at semi-annual YTM

Current Bond Price = 50/(1+0.05^1 +50/(1+0.05^2 +50/(1+0.05^3 +50/(1+0.05^4 +50/(1+0.05^5 +50/(1+0.05^6 + .....50/(1+0.05^34 +1000/(1+0.05^ 34

Current Bond Price = 1000 Answer

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