Question

Landover ridge offers a 10 percent annual coupon bond with semiannual payments. The yield to maturity is 8 percent and the bonds mature in 8 years. What is the price per bond if the face value is $1000?

Answer 1

Solution:-
	Annual coupon rate	=10%
	Yield to maturity	=8%
	Time to mature	= 8 years
	Face value of the bond	= $1000
	Semi annual interest	=($1000*10%)/2
		=$50
	Numbers of payment peroids (n)	=16
	Semi annual YTM	=4%
	Current price of the bond
	=Semi annual interest*PVIFA(4%,16)+Maturity value of bond*PVIF(4%,16)
		=50*11.6523+1000*0.533908
		=582.615+533.908
		=$1,116.523
	Calcluation of Present value factor @		4%
		Years	PVF
		1	0.961538
		2	0.924556
		3	0.888996
		4	0.854804
		5	0.821927
		6	0.790315
		7	0.759918
		8	0.73069
		9	0.702587
		10	0.675564
		11	0.649581
		12	0.624597
		13	0.600574
		14	0.577475
		15	0.555265
		16	0.533908
		Total	11.6523
	Please feel free to ask if you have any query in the comment section.