Question

If the going Market Interest is 1.2% , then price of a Bond that has coupon rate of 6.00 % and remaining maturity of 12 years must be:

Answer 1

The price of a bond is the sum total of the PVs of the expected cash
flows from the bond, if it is held till maturity, the discount
rate being the market interest rate of 1.2% p.a.
As nothing is said about the coupon payment, it is assumed to be
annual.
The expected cash flows from the bond are:
*the maturity value of $1,000, receivable at EOY 12, and
*the annual interest payments of $60 for 12 years,
which constitutes an annuity.
Price of the bond = 1000/1.012^12+60*(1.012^12-1)/(0.012*1.012^12) =	$       1,533.48
If it is half yearly coupon payment, the
Price of the bond = 1000/1.006^24+30*(1.006^24-1)/(0.006*1.006^24) =	$       1,534.96