Question

A 10-year bond pays interest of $27.10 semiannually, has a face value of $1,000, and is selling for $786.13.What are its annual coupon rate and yield tomaturity?

Answer #1

Annual coupon rate = semi annual coupon*2/oar value = 27.1*2/1000=5.42%

K = Nx2 |

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

k=1 |

K =10x2 |

786.13 =∑ [(5.42*1000/200)/(1 + YTM/200)^k] + 1000/(1 + YTM/200)^10x2 |

k=1 |

YTM% = 8.66 |

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