Yan Yan Corp. has a $3,000 par value bond outstanding with a coupon rate of 5 percent paid semiannually and 12 years to maturity. The yield to maturity of the bond is 5.6 percent.

The price of the bond will be given by:

P=total sum (c / (1+ytm) ^t) + (per value) / (1+ytm) ^n

ytm=0.056

c=coupon=2.5%=0.025*3000=75

t=12 years

this can be written as follows using continous compounding

Bond price, P will be:

P=75e^ (0.056*2*1) + 75e^ (0.056*2*2) + 75e^ (0.056*3*2) + 75e^ (0.056*4*2) + ... + 75e^ (0.056*11*2) + 3075e^ (0.56*12*2)

=$2844.24