Question

Sqeekers Co. issued 15-year bonds a year ago at a coupon rate of 8.7 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 7 percent, what is the current bond price

Answer 1

Bond Price​= $1,156.33

Step-by-step explanation:

Giving the following information:

Number of periods= 15*2= 30 semesters

Cupon= (0.087/2)*1,000= $43.5

YTM= 0.07/2= 0.035

Par value= $1,000

To calculate the price of the bond, we need to use the following formula:

Bond Price​= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]

Bond Price​= 43.5*{[1 - (1.035^-30) / 0.035]} + [1,000 / (1.035^30)]

Bond Price​= 800.05 + 356.28

Bond Price​= $1,156.33