Final answer:
To calculate the market price of the bond, we use the present value formula, which takes into account the coupon payment, yield to maturity rate, number of periods, and par value. Plugging in the values and solving for present value, we find that the market price of the bond is approximately $1363.74.
Step-by-step explanation:
To calculate the market price of the bond, we need to use the present value formula. The formula is:
PV = C × (1 - (1 + r)-n) / r + F / (1 + r)n
Where PV is the present value, C is the coupon payment, r is the yield to maturity (YTM) rate, n is the number of periods, and F is the par value. In this case, the coupon payment is $2000 * 5.96% / 2 = $59.60, the YTM rate is 5.3% / 2 = 0.0265, the number of periods is 19 * 2 = 38, and the par value is $2000.
Plugging in these values into the formula:
PV = $59.60 × (1 - (1 + 0.0265)-38) / 0.0265 + $2000 / (1 + 0.0265)38
Solving for PV, we get:
PV ≈ $1363.74
Therefore, the market price of the bond is approximately $1363.74.