Question

A bond with 21 years until maturity has a coupon rate of 7.6 percent and a yield to maturity of 7.7 percent. What is the price of the bond?

Answer 1

Let par value of bond = $1,000

Coupon payment = $1,000 * 7.6% = $76

Yield to maturity = 7.7%

Years to Maturity = 21 years

Price = [coupon amount * PVAF(7.7% , 21 years)] + [$1,000 * 1/(1.077)²¹]

Price = [$76 * PVAF(7.7% , 21 years)] + [$1,000 * 1/(1.077)²¹]

Price = ($76 * 10.25187) + ($1000 * 0.210606)

Price = $989.75