Question

A 10-year 5.2% coupon bond was issued 6 years ago. Similarly risky bonds are yielding 5.5%. Assume semi-annual coupon payments. The bond's price should be $___________. Do not round any intermediate work. Round your *final* answer to 2 decimal places (example: 1234.567 = 1234.57). Do not enter the $ sign. Margin of error for correct responses: +/- .05.

Answer 1

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2

k=1

K =4x2

Bond Price =∑ [(5.2*1000/200)/(1 + 5.5/200)^k]     +   1000/(1 + 5.5/200)^4x2

k=1

Bond Price = 989.36