What is the quoted price of a bond with 5 years to maturity, a coupon rate...

What is the quoted price of a bond with 5 years to maturity, a coupon rate of 8%, and a YTM of 7.5%? Coupons are paid semi-annually.

Solutions

Expert Solution

Quoted price of bond = coupon * (1 - (1+ ytm/2)^(-2n))/(ytm/2) + face value/(1 + ytm/2)^(2n)

coupon = 8% of 100/2 = 4

ytm = 7.5%

n = 5

face value = 100

quoted price of bond = 4 * (1 - 1.0375)^(-10)/.0375 + 100/(1.0375)^10

= 102.05

jeff jeffy answered 1 year ago

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