Question

There is a 9.6% coupon bond with annual payments. The yield to maturity is 5.85% and the maturity date is 9 years. What is the market price of a $840 face value bond?

Answer 1

Information provided:

Face value= Future value= $840

Time= 9 years

Coupon rate= 9.6%

Coupon payment= 0.096*840= $80.64

Yield to maturity= 5.85%

The market price is calculated by computing the present value of the bond.

Enter the below in a financial calculator to calculate the market price of the bond:

FV= 840

N= 9

PMT= 80.64

I/Y= 5.85

Press the CPT key and PV to compute the present value of the bond.

The value obtained is $1,055.66.

Therefore, the market price of the bond is $1,055.66.