Answer:
The yield to maturity is 7.5%
The price of the bond at 9% yield to maturity is $934.96
Explanation:
In calculating the yield I used the rate formula in Excel, rate formula is given as:
=rate(nper,pmt,-pv,fv)
nper is period to maturity of 10 years multiplied by 2(semi-annual compounding)
pmt is the coupon interest payable semi-annually which 8%*$1000/2=$40
pv is the current price of $1034.74
fv is the face value of $1000
=rate(20,40,-1034.74,1000)
=3.75%
APR=3.5%*2=7.5%
Bond price is the present value of the bond at yield of 9% with semi-annual yield of 4.5%
=pv(rate,nper,pmt,fv)
=pv(4.5%,20,40,1000)
pv=$934.96
find attached for details
