Question

You are considering a corporate bond with 10% coupon bonds with semiannual payments and a yield to maturity of 11% . The bonds mature in 9 years. What is the market price per bond if the face value is $1,000? (Round answers to two decimals, enter answer without $ or "," , such as 1234.78)

Answer 1

Semiannual interest = $1,000 * 0.10 * 6/12 = $50

The price of the bond is:

Current bond price = $50(PVIFA 5.5%,18) + $1,000(PVIF 5.5%,18)

Current bond price = ($50 * 11.2460744644) + ($1,000 * 0.38146590435)

Current bond price = $943.77