Question

Bond outstanding with a coupon rate of 5.66 percent and semi-annual payments. The bond has a yield to maturity of 6.3 percent, a par value of $2,000, and matures in 16 years. What is the quoted price of the bond?

Answer 1

Price of bond = 17.96825

Step-by-step explanation:

Bond price = ∑(C /
`(1+YTM)^(n)` )+ P /
`(1+i)^(n)`

where

n = no. of years

C = Coupon payments

YTM = interest rate or required yield

P = Par Value of the bond

put values in above equation

price = (5.66%/2) × 2000 × (0.31746) + ( 2000 ÷ 4.595×
`10^(18)`)

= 17.96825