Question

A bond pays a 5% coupon and makes semi-annual payments. The bond has 10 years to maturity and a YTM of 6%. What is the current bond price?

Answer 1

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2

k=1

K =10x2

Bond Price =∑ [(5*1000/200)/(1 + 6/200)^k]     +   1000/(1 + 6/200)^10x2

k=1

Bond Price = 925.61

Using Calculator: press buttons "2ND"+"FV" then assign

PMT = Par value * coupon %/coupons per year=1000*5/(2*100)

I/Y =6/2

N =10*2

FV =1000

CPT PV

Using Excel

=PV(rate,nper,pmt,FV,type)

=PV(6/(2*100),2*10,-5*1000/(2*100),-1000,)