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Compute the price of a $1,000 par value, 9 percent (semi-annual payment) coupon bond with 30...

Compute the price of a $1,000 par value, 9 percent (semi-annual payment) coupon bond with 30 years remaining until maturity assuming that the bond's yield to maturity is 18 percent? (Round your answer to 2 decimal places and record your answer without dollar sign or commas).

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Answer #1

Information provided:

Par value= future value= $1,000

Coupon rate= 9%/2= 4.5%

Coupon payment= 0.045*1,000= $45

Yield to maturity= 18%/2= 9% per semi-annual period

Time= 30 years*2= 60 semi-annual periods

The current price of the bond is calculated by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 1,000

PMT= 45

I/Y= 9

N= 60

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

The value obtained is 502.84.

Therefore, the current price of the bond is 502.84.

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

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