Merck issued bonds with a maturity of 14 years merck issued those bonds one year ago the bonds carried a coupon interest rate of 6.90% the bonds make semi annual interest payments the yield to maturity on the bonds is 5.20% what is the current bond price?
Let the face value be $ 1000
semiannual interest : 1000*.069*6/12 = 34.50
semiannual yield = 5.2*6/12= 2.6%
years remaining to maturity : 14-1=13
semiannual months = 13*2=26
Current price : [PVA 2.6%,26* Interest ]+[PVF 2.6%,26* Face value]
=[18.72844*34.50]+ [ .51306*1000]
= 646.13+ 513.06
= $ 1159.19
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