In: Finance
A bond has a coupon rate of 10 percent and 4 years until maturity. If the yield to maturity is 10.3 percent, what is the price of the bond?
Calculation of price of bond: | ||||
Particulars | Time | PVf @10.3% | Amount | PV |
Cash Flows (Interest) | 1.00 | 0.9066 | 100.00 | 90.66 |
Cash Flows (Interest) | 2.00 | 0.8220 | 100.00 | 82.20 |
Cash Flows (Interest) | 3.00 | 0.7452 | 100.00 | 74.52 |
Cash Flows (Interest) | 4.00 | 0.6756 | 100.00 | 67.56 |
Cash flows (Maturity Amount) | 4.00 | 0.6756 | 1,000.00 | 675.60 |
Fair Price | 990.54 | |||
Price of bond is $990.54 |