Question

Three years ago, processed goods issued semiannual bonds with an annual coupon rate of eight percent and 15 years to maturity. at their current price, the bonds yield 6%. at what percentage above or below par are these bonds trading for?

Answer 1

K = N

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

k=1

K =12

Bond Price =∑ [(8*1000/100)/(1 + 6/100)^k]     +   1000/(1 + 6/100)^12

k=1

Bond Price = 1167.68

Percentage above par = (price/par value-1)*100= (1167.68/1000-1)*100=16.6768%