Answer:
The price of the bond is $9,537.91
Explanation:
Coupon payment = $10,000 x 3.1 = $310 / 2 = $155
Number of period = n = 22 x 2 = 44 semiannual periods
Face Value = $10,000
Yield to maturity = 3.4% yearly = 3.4% /2 = 1.7% semiannually
Price of bond is the present value of future cash flows, to calculate Price of the bond use following formula:
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
Price of the Bond =$155 x [ ( 1 - ( 1 + 1.7% )^-44 ) / 1.7% ] + [ $10,000 / ( 1 + 1.7% )^44 ]
Price of the Bond = $155 x [ ( 1 - ( 1.017 )^-44 ) / 0.017 ] + [ $10,000 / ( 1.017 )^44 ]
Price of the Bond = $4,774.94 + $4,762.97
Price of the Bond = $9,537.91
