Question

Assume the current Treasury yield curve shows that the spot rates for six​ months, one​ year, and one and a half years are 1 %​, 1.1 %​, and 1.3 %​, all quoted as semiannually compounded APRs. What is the price of a ​$1 comma 000 ​par, 3.5 % coupon bond maturing in one and a half years​ (the next coupon is exactly six months from​ now)?

Answer 1

Bond Price:
Price of Bond = PV of CFs from it.

Period	CF	[email protected]%	Disc CF
1	$      17.50	0.9935	$      17.39
2	$      17.50	0.9871	$      17.27
3	$      17.50	0.9808	$      17.16
3	$ 1,000.00	0.9808	$    980.75
Price of the Bond	$ 1,032.58

PVF = 1.3% / 2 = 0.65%

CF = Coupon = 1000 * (3.5%/2)

Pls do rate, if the answer is correct and comment, if any further assistance is required.