In: Finance
The yield to maturity of a $1,000 bond with a 7.4 % coupon rate, semiannual coupons, and two years to maturity is 8.8 %APR, compounded semiannually. What is its price?
Statement showing price of bond: | ||||
( In case of semi annual bond, yield= 8.8/2=4.4%, Coupon rate=7.4/2=3.7%, Years=4 | ||||
Particulars | Time | PVf @4.4% | Amount | PV |
Cash Flows (Interest) | 1.00 | 0.9579 | 37.00 | 35.44 |
Cash Flows (Interest) | 2.00 | 0.9175 | 37.00 | 33.95 |
Cash Flows (Interest) | 3.00 | 0.8788 | 37.00 | 32.52 |
Cash Flows (Interest) | 4.00 | 0.8418 | 37.00 | 31.15 |
Cash flows (Maturity Amount) | 4.00 | 0.8418 | 1,000.00 | 841.80 |
Fair Price | 974.85 | |||
Price of Bond is $974.85 |