Question

The $1,000 face value ABC bond has a coupon rate of 6%, with interest paid semi-annually, and matures in 5 years. If the bond is priced to yield 8%, what is the bond's value today

Answer 1

Coupon = (0.06 multiply with 1000) / 2 = 30

Rate = 8% divide by 2 = 4%

The Number of periods = 5 multiply with 2 = 10

Bonds value = 918.89

Keys to use in a financial calculator:

Face Value = 1000

I/Y = 4

PMT = 30

N = 10

CPT PV

Thus, the value of bond = $918.89