Answer:
a. Find the bond's price today Price = 901,65
and six months from now after the next coupon is paid. Price = $915,75
Explanation:
Face Value = $1,000
Annual Coupon Rate = 8%
Semi-annual Coupon Rate = 4%
Semi-annual Coupon = 4%*$1,000 = $40
Semi-annual YTM = 6%
Today:
Time to Maturity = 3 years
Price = $40*PVIFA(6%, 6) + $1,000*PVIF(4%, 6)
Price = $40*(1-(1/1.06)^6)/0.06 + 1,000/1.06^6
Price = 901,65
Six months from now:
Time to Maturity = 2.5 years
Price = $40*PVIFA(6%, 5) + $1,000*PVIF(6%, 5)
Price = $40*(1-(1/1.06)^5)/0.06 + 1,000/1.06^5
Price = $915,75