Question

Weismann Co. issued 13-year bonds a year ago at a coupon rate of 9 percent. The bonds make semiannual payments and have a par value of $1.000. If the YTM on these bonds is 12 percent, what is the current bond price?

Answer 1

Solution :-

Face Value of Bond = $1,000

Semiannual Yield Rate = 12% / 2 = 6%

Coupon Rate = 9%

Semiannual Coupon Amount = $1,000 * 9% / 2 = $45

Time to maturity = 12 Years

Total Semiannual in 12 Years = 12 * 2 = 24

Now Current Price of Bond = $45 * PVAF ( 6% , 24 ) + $1,000 * PVF ( 6% , 24 )

= ( $45 * 12.55 ) + ( $1000 * 0.247 )

= $564.77 + $246.98

= $811.75

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