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You are planning on buying $100,000 face value of Australian Commonwealth Government Bonds. The bonds mature...

You are planning on buying $100,000 face value of Australian Commonwealth Government Bonds. The bonds mature on 15 February 2016 and have a coupon rate of 4.75%. If your purchase will settle on 27 April 2012, and the quoted yield for the bond is 5.32%, what is the cash price of the bonds to the nearest dollar?

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Answer #1
Par/Face value 100000
Annual Coupon rate 0.0475
Annual coupon 4750
Present Value = Future value/ ((1+r)^t)
where r is the interest rate that is 5.32% and t is the time period in years.
price of the bond = sum of present values of future cash flows
r 0.0532
mt 1 2 3 4
future cash flow 4750 4750 4750 104750
present value 4510.065 4282.249 4065.941 85135.49
sum of present values 97993.74
The cash price of the bonds to the nearest dollar is $97994.
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