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3 years ago

what is the quote of a 16 year, 3.2 semiannual coupon bond with 1,000 face value if the yield to maturity is 7.3 g

Business

1 answer:

murzikaleks [220]3 years ago

8 0

Answer:

Bond Price = $616.6938765 rounded off to $616.69

Explanation:

To calculate the quote/price of the bond today, we will use the formula for the price of the bond. Assuming the bond is a semi annual bond, the semi coupon payment, number of periods and semi annual YTM will be,

Coupon Payment (C) = 1000 * 0.032 * 6/12 = $16

Total periods (n) = 16 * 2 = 32

r or YTM = 0.073 * 6/12 = 0.0365 or 3.65%

The formula to calculate the price of the bonds today is attached.

Bond Price = 16 * [( 1 - (1+0.0365)^-32) / 0.0365] + 1000 / (1+0.0365)^32

Bond Price = $616.6938765 rounded off to $616.69

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Answer and Explanation:

The preparation of the income statement is presented below:

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