Question

A bond has a 10-year maturity, a 5% coupon paid semiannually, and $1000 par value.
The required rate of return (yield to maturity)on the bond is 11%.
Compute the price of the bond today using a table of cash flows
(discount the cash flow in each period back to the present using the time value of money formula)
SHOW WORK HERE, HIGHLIGHT FINAL ANSWER IN YELLOW
Period (NPER)	Cash flow	PV

Answer 1

Price of bond	[Coupon amount*(1-((1+r)^-n)/r] + Face value*(1/(1+r^n)
Semi annual coupon amount	$25	1000*(5%/2)
Semi annual yield	5.50%	11%/2
No of payments	20	10*2
The cash flow table to calculate present value is shown below
Period (NPER)	Cash flow (a)	Present value factor @ 5.50% (b)	Working for PV factor	PV (a*b)
1	$25	0.94786730	1/(1.055^1)	$23.70
2	$25	0.89845242	1/(1.055^2)	$22.46
3	$25	0.85161366	1/(1.055^3)	$21.29
4	$25	0.80721674	1/(1.055^4)	$20.18
5	$25	0.76513435	1/(1.055^5)	$19.13
6	$25	0.72524583	1/(1.055^6)	$18.13
7	$25	0.68743681	1/(1.055^7)	$17.19
8	$25	0.65159887	1/(1.055^8)	$16.29
9	$25	0.61762926	1/(1.055^9)	$15.44
10	$25	0.58543058	1/(1.055^10)	$14.64
11	$25	0.55491050	1/(1.055^11)	$13.87
12	$25	0.52598152	1/(1.055^12)	$13.15
13	$25	0.49856068	1/(1.055^13)	$12.46
14	$25	0.47256937	1/(1.055^14)	$11.81
15	$25	0.44793305	1/(1.055^15)	$11.20
16	$25	0.42458109	1/(1.055^16)	$10.61
17	$25	0.40244653	1/(1.055^17)	$10.06
18	$25	0.38146590	1/(1.055^18)	$9.54
19	$25	0.36157906	1/(1.055^19)	$9.04
20	$1,025	0.34272896	1/(1.055^20)	$351.30
Price of bond				$641.49
Thus, price of bond today is $641.49.
At the end of the year company would receive coupon amount plus face value of bond which gives $1,025 (1000+25)