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X Instructor-created question Question Help 3-Leaf Company is about to issue a bond with semiannual coupon payments, an annual coupon rate of 6%, and par value of $2,000. The yield to matunity for this bond is 5% a. What is the price of the bond if it matures in 5 years? a. What is the price of the bond if it matures in 5 years? $ (Round to the nearest cont.)

Answer 1

Par value=$2000
Annual coupon rate=6%
Semiannual coupon rate=6%/2=3%
Semiannual coupon payment=(Semiannual coupon rate)*(Par value)=3%*2000=60
Semiannual yield to maturity =5%/2=2.5%
Time period=5 years
As the coupon payment is made semiannually, the number of periods=5*2=10

1 Par value 2000 2 Coupon payment 60 3 Yield to maturity 2.50% 4 Number of periods 5 Present value= ($2,087.52) 6 Formula used: PV(E3, E4, E2, E1)

So, price of the bond is $2087.52