Question

a corporation bonds have a 10 year maturity, a 7% annual coupon paid annually, and a par value of 1000. the yield to maturity is quoted as 8% in the financial press. what is the bonds price?

Answer 1

K = N

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

k=1

K =10

Bond Price =∑ [(7*1000/100)/(1 + 8/100)^k]     +   1000/(1 + 8/100)^10

k=1

Bond Price = 932.9