Question

A 10 year bond is redeemable at par of 100,000. The bond has semi-annual coupons of 4000. The bond is bought to yield 6% convertible semi-annually. Four months after purchase, calculate the market price based on the theoretical method less the market price based on the semi-theoretical method.

Answer 1

$117,544.14

Step-by-step explanation:

Current Price of bond is $114,877.47.

Accrued interest for 4 month = $4,000 × (4 / 6)

= $2,666.67

Price of bond after 4 month of purchase = $114,877.47 + $2,666.67

= $117,544.14.

Price of bond after 4 month of purchase will be $117,544.14.

The picture attached shows how to get the current price of bond on excel.