Question

bond prices. price the bonds from the following table with semiannually coupon payments.

par value. coupon rate. YearTM. YieldTM.   price
$5,000.00.         8%               5.                8%          ?
$1,000.00.         5%               10.             11%         ?
$1,000.00.        11%              20.              9%          ?
$5,000.00.          6%               5.                7%         ?

Answer 1

K = Nx2

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

k=1

K =5x2

Bond Price =∑ [(8*5000/200)/(1 + 8/200)^k]     +   5000/(1 + 8/200)^5x2

k=1

Bond Price = 5000

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 + 11/200)^k]     +   1000/(1 + 11/200)^10x2

k=1

Bond Price = 641.49

K = Nx2

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

k=1

K =20x2

Bond Price =∑ [(11*1000/200)/(1 + 9/200)^k]     +   1000/(1 + 9/200)^20x2

k=1

Bond Price = 1184.02

K = Nx2

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

k=1

K =5x2

Bond Price =∑ [(6*5000/200)/(1 + 7/200)^k]     +   5000/(1 + 7/200)^5x2

k=1

Bond Price = 4792.08