Question

Assume a par value of $1,000. Caspian Sea plans to issue a 13.00 year, annual pay bond that has a coupon rate of 7.81%. If the yield to maturity for the bond is 8.38%, what will the price of the bond be?

Answer 1

Interest = $1,000 * 0.0781 = $78.1

The price of the bond is:

Current bond price = $78.1(PVIFA 8.38%,13) + $1,000(PVIF 8.38%,13)

Current bond price = ($78.1 * 7.74121475823) + ($1,000 * 0.35128620319)

Current bond price = $955.88