Question

# Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere...

Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 10 years to maturity, and a coupon rate of 6.12 percent paid annually.

If the yield to maturity is 2.73 percent, what is the current price of the bond?

We know that,

Price of the bond = Present value of all the annual coupons and face value discounted at ytm

Face Value = 1000

Annual Coupon = 6.12% * 1000 = 61.2

Ytm =   2.73%

Number of payments = 10

Price of the bonds = 61.2/(1+0.0273)^1 + 61.2/(1+0.0273)^2 +61.2/(1+0.0273)^3 +61.2/(1+0.0273)^4 +61.2/(1+0.0273)^5 +61.2/(1+0.0273)^6 +61.2/(1+0.0273)^7 +61.2/(1+0.0273)^8 +61.2/(1+0.0273)^9 +61.2/(1+0.0273)^10 + 1000/(1+0.0273)^10

Price of the bonds = 1293.20 Answer

#### Earn Coins

Coins can be redeemed for fabulous gifts.