a 10-year bond, $1,000 face value bond with a 8% coupon rate and semi-annual coupons has a yield to maturity of 12%. the bond should be trading at the price of? round to nearest cent
Face value= future value= $1,000
Time= 10 years*2= 20 semi-annual periods
Coupon rate= 8%/2= 4%
Coupon payment= 0.04*1,000= $40 per semi-annual period
Yield to maturity= 12%/2= 6% per semi-annual period
The price of the bond is calculated by computing the present value.
Enter the below in a financial calculator to compute the present value:
Press the CPT key and PV to compute the present value.
The value obtained is 770.60.
Therefore, the bond at a price of $770.60.
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