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?
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:
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.
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