Question

25-year bond has a $1,000 face value, a 10% yield to maturity, and an 8% annual coupon rate, paid semi-annually. What is the market value of the bond?

Suppose a bond with a 10% coupon rate and semiannual coupons, has a face value of $1000, 20 years to maturity and is selling for $1197.93. What’s the YTM?

Answer 1

Answer to Question 1:

Face value = $1,000

Annual coupon rate = 8%
Semiannual coupon rate = 4%
Semiannual coupon = 4% * $1,000
Semiannual coupon = $40

Annual YTM = 10%
Semiannual YTM = 5%

Time to maturity = 25 years
Semiannual period = 50

Current price = $40 * PVIFA(5%, 50) + $1,000 * PVIF(5%, 50)
Current price = $40 * (1 - (1/1.05)^50) / 0.05 + $1,000 / 1.05^50
Current price = $817.44