Question

Jill is interested in a 10-year bond which pays a coupon of 7.6 percent annually and trades at a yield of 9.2% per annum. The face value is $1,000. What is the current price of this bond? (to the nearest cent)

Select one:

a. $898.22

b. $896.83

c. $1109.33

d. $414.74

Answer 1

	Frequency in a year	1
	YTM	9.20%
	Coupon rate	7.60%
	Face value	$       1,000
	Coupon payment	$            76	=1000*7.6%/1
	Years to maturity	10
	No. of periods	10
		9.20%
Year	Cash Flow	PV factor = 1/ (1+r)^t	PV
0	$                            -	1.000	$            -
1	$                      76.00	0.916	$       69.60
2	$                      76.00	0.839	$       63.73
3	$                      76.00	0.768	$       58.36
4	$                      76.00	0.703	$       53.45
5	$                      76.00	0.644	$       48.94
6	$                      76.00	0.590	$       44.82
7	$                      76.00	0.540	$       41.04
8	$                      76.00	0.495	$       37.59
9	$                      76.00	0.453	$       34.42
10	$                      76.00	0.415	$       31.52
10	$                 1,000.00	0.415	$     414.74
		Total	$     898.22
So the price of the bond will be $ 898.22.