Question

Homer Homer plans to issue a bond that pays 6.66 percent coupon bonds with semiannual payments and a yield to maturity of 7.24 percent. The bonds mature in seven years and have a face value of $1,000. What is the market price of the bond?

Answer 1

Price of Bond = PV of CFs from it.

Period	CF	PVF @3.62%	Disc CF
1	$      33.30	0.9651	$   32.14
2	$      33.30	0.9313	$   31.01
3	$      33.30	0.8988	$   29.93
4	$      33.30	0.8674	$   28.88
5	$      33.30	0.8371	$   27.88
6	$      33.30	0.8079	$   26.90
7	$      33.30	0.7796	$   25.96
8	$      33.30	0.7524	$   25.06
9	$      33.30	0.7261	$   24.18
10	$      33.30	0.7008	$   23.34
11	$      33.30	0.6763	$   22.52
12	$      33.30	0.6526	$   21.73
13	$      33.30	0.6298	$   20.97
14	$      33.30	0.6078	$   20.24
14	$ 1,000.00	0.6078	$ 607.84
Price of Bond	$ 968.58