Question

Compute the price of a $1,000 par value, 6 percent (semi-annual payment) coupon bond with 24 years remaining until maturity assuming that the bond's yield to maturity is 14 percent? (Round your answer to 2 decimal places and record your answer without dollar sign or commas).

Answer 1

Information provided:

Par value= future value= $1,000

Coupon rate= 6%/2= 3%

Coupon payment= 0.03*1,000= $30

Time= 24 years*2= 48 semi-annual periods

Yield to maturity= 14%/2= 7%

The current price of the bond is computed by calculating the present value.

Enter the below in a financial calculator:

FV= 1,000

PMT= 30

N= 48

I/Y= 7

Press the CPT key and PV to compute the present value.

The value obtained is 450.78.

Therefore, the current price of the bond is 450.78.

In case of any query, kindly comment on the solution.