Question

Yan Yan Corp. has a $2,000 par value bond outstanding with a coupon rate of 4.4 percent paid semiannually and 13 years to maturity. The yield to maturity of the bond is 4.8 percent. What is the price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Issue price of Bond = $ 1,923.29

Calculations

Bonds issue price is calculated by ADDING the:
Discounted face value of bonds payable at market rate of interest, and
Discounted Interest payments amount (during the lifetime) at market rate of interest.

	Annual Rate	Applicable rate		Face Value	$                 2,000.00
Market Rate	4.80%	2.40%		Term (in years)	13
Coupon Rate	4.40%	2.20%		Total no. of interest payments	26

	Bond Face Value		Market Interest rate (applicable for period/term)
PV of	$ 2,000.00	at	2.4%	Interest rate for	26	term payments
PV of $1	0.53976053
PV of	$    2,000.00	=	$ 2,000.00	x	0.539760535	=	$1,079.52	A
Interest payable per term	at	2.2%	on	$ 2,000.00
Interest payable per term	$ 44.00
PVAF of 1$	for	2.4%	Interest rate for	26	term payments
PVAF of 1$	19.1766444
PV of Interest payments	=	$                      44.00	x	19.17664439	=		$ 843.77	B
				Bond Value (A+B)			$1,923.29