A 3-year, semi-annual bond has an 8% coupon rate and a face value of $1,000. If...

A 3-year, semi-annual bond has an 8% coupon rate and a face value of $1,000. If the yield to maturity on the bond is 10%, what is the price of the bond?

Expert Solution

Statement showing price of bond:
( In case of semi annual bond, yield= 10/2=5%, Coupon rate=8/2=4%, Years=6
Particulars	Time	PVf @5%	Amount	PV
Cash Flows (Interest)	1.00	0.9524	40.00	38.10
Cash Flows (Interest)	2.00	0.9070	40.00	36.28
Cash Flows (Interest)	3.00	0.8638	40.00	34.55
Cash Flows (Interest)	4.00	0.8227	40.00	32.91
Cash Flows (Interest)	5.00	0.7835	40.00	31.34
Cash Flows (Interest)	6.00	0.7462	40.00	29.85
Cash flows (Maturity Amount)	6.00	0.7462	1,000.00	746.20
Fair Price				949.23
Price of Bond is $949.23

jeff jeffy answered 3 years ago

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