Question

A bond has a face value of $10,000. The bond matures in 12 years and pays its coupon interest semi-annually. The coupon rate is 9%. Assuming a yield of 8%, what is the price of the bond?

Answer 1

Bond Price​= $10,762.31

Step-by-step explanation:

Giving the following information:

Face value= $10,000

Time= 12*2= 24

Cupon= (0.09/2)*10,000= $450

YTM= 0.08/2= 0.04

To calculate the price of the bond, we need to use the following formula:

Bond Price​= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]

Bond Price​= 450*{[1 - (1.04^-24)] / 0.4} + [10,000/(1.04^24)]

Bond Price​= 6,861.1 + 3,901.21

Bond Price​= $10,762.31