Question

Chubb Co. issued 8-year bonds two years ago at a coupon rate of 9 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 6 percent, what is the current bond price?

Answer 1

Face/Par Value of bond = $1000

Semi-annual Coupon Bond = $1000*9%*1/2

= $45

No of coupon payments(n) =No of years to maturity*2 =(8 years - 2 years)*2 = 12

Semi-annual YTM = 6%/2 = 3%

Calculating the Market price of Bond:-

Price = $447.93 + $701.380

Price = $1149.31

So,the current market price of these bonds is $1149.31