Question

A bond issued by Vodafone has a coupon rate of 6.15% with semiannual payments, a par value of $1,000,and remaining maturity of exactly 25 years. The bond is currently trading at a price in the market that reflects a yield to maturity for the bond of 3.86%. What is the current value of the bond

Answer 1

$1,365.15

Step-by-step explanation:

Coupon rate = 6.15%

Par Value = 1000

Years = 25

Coupon = 30.75

No of the periods = 50 (25*2)

Semi YTM = 1.93% (3.86%/2)

Price = PV(Semi YTM, No of the periods, -Coupon, -Par Value)

Price = PV(1.93%, 50, -30.75, -1000)

Price = $1,365.15

So, the current value of the bond is $1,365.15.