Question

What would you pay for a bond that pays an annual coupon of $70, paid semiannually, par value, matures in 6 years, and has a yield to maturity of 8%

Answer 1

Price per bond is $953.77

Step-by-step explanation:

The price to be paid for the bond can be computed using pv excel function as below:

=-pv(rate,nper,pmt,fv)

rate is the yield to maturity of 8%

nper is number of coupons that the bond would pay i.e 6 annual coupons in 6 years

pmt is the annual coupon of $70

fv is the face value of $1000 by default

=-pv(8%,6,70,1000)=$953.77