Question

What is the price of a $10,000 bond with a 7.60% coupon rate, semiannual coupons, and five years to maturity if it has a Yield-to-Maturity of 4.30%? $8,280 O $11,471 $9,779 $10,893 $8,648

Answer 1

Answer: $9,779

Explanation:

Where:

C is the coupon payment

r is the yield to maturity (expressed as a decimal)

n is the total number of coupon payments

F is the face value or par value of the bond

In this case, the bond has a $10,000 face value, a coupon rate of 7.60% (or 0.076 as a decimal), semiannual coupons, and a yield to maturity of 4.30% (or 0.043 as a decimal). The bond matures in five years, so there will be 10 semiannual coupon payments.

Let's calculate the price: