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19 July, 10:02

Assume a par value of $1,000. Caspian Sea plans to issue a 19.00 year, semi-annual pay bond that has a coupon rate of 8.09%. If the yield to maturity for the bond is 7.68%, what will the price of the bond be?

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Answers (1)
  1. 19 July, 11:55
    0
    Price of Bond is 1,031.36

    Explanation:

    Step 1. Given information.

    Par value $1.000

    Issue to 19 year

    Coupon rate 8.09%

    Yield maturity 7.68%

    Step 2. Formulas needed to solve the exercise.

    Price of Bond = PV of Coupons+PV of Par Value

    Step 3. Calculation.

    Number of Periods = 8*2 = 16

    Semi annual coupon = 8.11%*1000/2 = 40.55

    Semi annual YTM = 7.58%/2 = 3.79%

    Price of Bond = 40.55 * ((1 - (1+3.79%) ^-16) / 3.79%) + 1000 / (1+3.79%) ^16 = 1031.36

    Step 4. Solution.

    Price of Bond is 1,031.36
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Home » Business » Assume a par value of $1,000. Caspian Sea plans to issue a 19.00 year, semi-annual pay bond that has a coupon rate of 8.09%. If the yield to maturity for the bond is 7.68%, what will the price of the bond be?
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