Question

1. Compute the price of a $1,000 par value, 10 percent (semi-annual payment) coupon bond with 27 years remaining until maturity assuming that the bond's yield to maturity is 15 percent? (Round your answer to 2 decimal places and record your answer without dollar sign or commas).

Answer 1

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2

k=1

K =27x2

Bond Price =∑ [(10*1000/200)/(1 + 15/200)^k]     +   1000/(1 + 15/200)^27x2

k=1

Bond Price = 673.38