Question

What is the current price of a $1,000 par value bond maturing in 12 years with a coupon rate of 14 percent, paid semiannually, that has a ytm of 13 percent?.

Answer 1

The current price of a $1,000 par value bond maturing in 12 years with a coupon rate of 14%, paid semiannually, and a YTM of 13% is $1,899.31.

How is the price of bonds calculated?

The price of bonds can be computed using the present value formula of all future cash flows.

The present value table can also be used.  Here, we have used the present value calculator from an online finance calculator, as below.

Data and Calculations:

N (# of periods) = 24 (12 x 2)

I/Y (Interest per year) = 13%

PMT (Periodic Payment) = $140

FV (Future Value) = $1,000

Results:

PV = $1,899.31

Sum of all periodic payments = $3,360 ($140 x 24)

Total Interest $2,460.69

Thus, the current price of a $1,000 par value bond maturing in 12 years with a coupon rate of 14%, paid semiannually, and a YTM of 13% is $1,899.31.

Learn more about the price of bonds at brainly.com/question/25596583