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13 votes
13 votes
A 15-year semi-annual coupon bond pays a coupon rate of 7%. The par value of the bond is $1,000. If similar bonds are currently yielding 6%, what is the market value of the bond

User Denis Fetinin
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1 Answer

20 votes
20 votes

Answer:

Bond Price​= $1,098.01

Step-by-step explanation:

Giving the following information:

Coupon= (0.07/2)*1,000= $35

YTM= 0.06/2= 0.03

n= 15*2= 30

Face 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​= 35*{[1 - (1.03^-30)] / 0.03} + (1,000 / (1.03^30)]

Bond Price​= 686.02 + 411.99

Bond Price​= $1,098.01

User Falko Menge
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