Question

has issued bonds that have a 8% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000, and a yield to maturity of 5%. What is the price of the bonds

Answer 1

Answer:

Bond Price​= $1,195.82

Explanation:

Giving the following information:

Face value= $1,000

YTM= 0.05/2= 0.025

Years tomaturity= 8*2= 16 semesters

Coupon= (0.08/2)*1,000= $40

To calculate the price of the bond, we need to use the following formula:

Bond Price​= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]

Bond Price​= 40*{[1 - (1.025^-16)] / 0.025} + [1,000/(1.025^16)]

Bond Price​= 522.2 + 673.62

Bond Price​= $1,195.82