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30 October, 08:08

A bond that pays interest semiannually has a coupon rate of 5.02 percent and a current yield of 5.29 percent. The par value is $1,000. What is the bond's price?

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  1. 30 October, 08:57
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    Bond's price is $948.96

    Explanation:

    Price of the bond is the present value of all cash flows of the bond. Price of the bond is calculated by following formula:

    According to given data

    Coupon payment = $1,000 x 5.02% = $50.2

    Current Yield = 5.29%

    Price of the Bond = Coupon Payment / Current Yield

    Price of the Bond = $50.2 / 5.29%

    Price of the Bond = $50.2 / 0.0529

    Price of the Bond = $948.9
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