A $1,000 bond with a coupon rate of 5% paid semi-annually has 10 years to maturity...

A $1,000 bond with a coupon rate of 5% paid semi-annually has 10 years to maturity and a yield to maturity of 7%. The price of the bond is closest to $________. Input your answer without the $ sign and round your answer to two decimal places.

Solutions

Expert Solution

Semi Annual Coupon = 1000*5%/2 = $25

Semi Annual Yield = 0.07/2 = 0.035

Period	Cash Flow	Discounting Factor [1/(1.035^year)]	PV of Cash Flows (cash flows*discounting factor)
1	25	0.966183575	24.15458937
2	25	0.9335107	23.33776751
3	25	0.901942706	22.54856764
4	25	0.871442228	21.78605569
5	25	0.841973167	21.04932917
6	25	0.813500644	20.33751611
7	25	0.785990961	19.64977402
8	25	0.759411556	18.98528891
9	25	0.733730972	18.3432743
10	25	0.708918814	17.72297034
11	25	0.684945714	17.12364284
12	25	0.661783298	16.54458246
13	25	0.639404153	15.98510382
14	25	0.61778179	15.44454476
15	25	0.596890619	14.92226547
16	25	0.576705912	14.41764779
17	25	0.557203779	13.93009449
18	25	0.53836114	13.45902849
19	25	0.52015569	13.00389226
20	25	0.502565884	12.56414711
20	1000	0.502565884	502.5658844
		Price of the Bond = Sum of PVs	857.875967 = 857.88

jeff jeffy answered 1 year ago

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