Final answer:
The bond's price is calculated using the annual coupon payment divided by the current yield, approximately $951.22. The YTM calculation is more complex, requiring a financial calculator or numerical methods to determine the rate that makes the bond's cash flows' present value equal to its price.
Step-by-step explanation:
The question involves finding the bond's price and yield to maturity (YTM) given a semiannual coupon rate and current yield. Since a 7% semiannual coupon bond pays 3.5% of its face value every six months, the total annual coupon payment is 7% of $1,000, equaling $70. The current yield is given as 7.3583%, which is the annual coupon payment divided by the bond's current price.
To calculate the bond's current price using the current yield formula, we yield to price = annual coupon payment / current yield. So, the bond price = $70 / 0.073583, which equals approximately $951.22 when rounded to the nearest cent.
The YTM represents the total return if the bond is held to maturity, including all coupon payments and any capital gain or loss. To find the YTM, we need to solve a complex equation involving the present value of future cash flows, which often requires numerical methods and financial calculators. It's not immediately apparent from the current yield alone and would typically involve solving for the rate that equalizes the present value of the bond's cash flows (coupon payments and the face value) to the current market price.