Question

Aloha Inc. has 4.5 percent coupon bonds on the market that have 7 years left to maturity. If the YTM on these bonds is 8.6 percent, what is the current bond price? The bond pays coupons twice a year.

Answer 1

	Coupon Amount		4.5
	Half yearly YTM		8.6/2	(Because the bond pays coupon twice a year)
		=	4.3%
		Half Year	1	2	3	4	5	6	7	8	9	10	11	12	13	14
Coupon			4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5
Face value																100
Cash Flows			4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5	4.5	104.5
Price			4.5/(1+4.3%)^1	4.5/(1+4.3%)^2	4.5/(1+4.3%)^3		………………….									104.5/(1+4.3%)^14
P	=	102.1