Question

A bond has a par value of $1000 and a coupon rate of 9.5%. The bond matures in 7 years. What is the value of the bond if similar bonds yield 4%?

This bond makes semiannual payments. Can you show how to input it in a financial calculator.

Answer #1

**The value of the bond is computed as shown
below:**

**The coupon payment is computed as follows:**

= 9.5% / 2 x $ 1,000 (Since the payments are semi annually, hence divided by 2)

**= $ 47.50**

**The YTM will be as follows:**

= 4% / 2 (Since the payments are semi annually, hence divided by 2)

**= 2%**

**N will be as follows:**

= 7 x 2 (Since the payments are semi annually, hence multiplied by 2)

**= 14**

**So, the price of the bond using the financial calculator
will be as follows:**

**Simply plug the below figures in the
calculator**

**PMT = 47.50**

**N = 14**

**I/Y = 2**

**FV = 1,000**

**Finally press CPT and then press PV.**

**It will give PV equal to 1,332.92
Approximately**

Feel free to ask in case of any query relating to this question

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