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A 5.5 percent $1,000 bond matures in seven years, pays interest semiannually, and has a yield to maturity of 6.23 percent. what is the current market price of the bond?
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A 5.5 percent $1,000 bond matures in seven years, pays interest semiannually, and has a yield to maturity of 6.23 percent. what is the current market price of the bond?

User Fredulom
by
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1 Answer

1 vote
We are given with
rb = 5.5%
ib = 5.5%/2 = 2.75%
F = 1000
n = 7 x 2 = 14 semi-annuals
i = 6.23%

The formula to use is
P = F ib [1-(1/(1 + i)^n]/i + F / (1 + i)^n
Substitute the given values and solve for P.
User Luukburger
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