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The yield to maturity of a $1,000 bond with a 7.4 % coupon​ rate, semiannual​ coupons,...

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?

Solutions

Expert Solution

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

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