Consider a coporate bond maturing on April 14, 2025 witha. coupon rate of 5% and yield of 6%. What is the clean price of the bond on July 23, 2018?
a. 945.22
b. 946.13
c. 958.88
d. 1,000.00
i know the answer is A. I want to know how and why it is that answer. I dont know how to solve? I am using BA II PLUS and TI-84 Plus
FV = Future Value = $ 1,000 (assuming face value of bond is $ 1,000)
N = Term = ((14-Apr-2025) – (23-Jul-2018))/365 = ~ 6.732 years
PV = Present Value or Price of Bond = ?
PMT = Coupon = 5% x 1000 = 50
I/Y = Yield = 6%
Using financial calculator BA II Plus – Texas Instrument:
Input values in following sequence (all inflows in negative eg. FV and PMT):
N = 6.732 ; PMT = -50 ; I/Y = 6 ; FV = -1000 ; CPT > PV
Result: PV = 945.92
Hence, we can go with option A. 945.22; which close to 945.92.
Get Answers For Free
Most questions answered within 1 hours.