Question

A corporate bond matures on October 31, 2035. Its coupon rate is 5.00% and face value is $100. Its yield is 5.90%. How much is its price on June 3, 2020

Answer 1

Its price on June 3, 2020 is $90.70.

Step-by-step explanation:

The price of the Bond is its Present Value (PV) .

You need to determine first the number of years between June 3, 2020 and October 31, 2035. Draw a timeline to be accurate. There are 16 years and 5 months.

Next, we can calculate the price using time value of money techniques.

N = 16.4

PMT = $100 × 5.00% = $5

P/Yr = 1

FV = $100

IRR = 5.90%

PV = ?

Using a Financial calculator to input the values as above, the price of Bond on June 3, 2020 is $90.70.