Answer:
First bond new price= $921.53
Second bond new price =$801.05
Explanation:
a. Face value= future value= $1,000
Coupon rate= 5.90%
Coupon payment= 0.0590*1,000= 59
Time= 3 years
Yield to maturity= 9%
Enter the below in a financial calculator to calculate the present value of the bond:
FV= 1,000
PMT= 59
N= 3
I/Y= 9
The value obtained is 921.53.
Therefore, the new price of the bond is $921.53.
b. Face value= future value= $1,000
Coupon rate= 5.90%
Coupon payment= 0.0590*1,000= 59
Time= 10 years
Yield to maturity= 9%
Enter the below in a financial calculator to calculate the present value of the bond:
FV= 1,000
PMT= 59
N= 10
Interest rate per annum= 9
The value obtained is 801.05.
Therefore, the new price of the bond is $801.05.
