Question

Calculate the price of an 8.0% semi-annual bond. The bond was originally issued with a 10-year term to maturity and exactly five years remain until maturity. The rates on new 10-year semi-annual bonds of comparable risk are 7.0% and on new five-year semi-annual bonds of comparable risk are 6.0%. When face value is not given, please take Par @100.

Answer 1

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2

k=1

K =5x2

Bond Price =∑ [(8*100/200)/(1 + 6/200)^k]     +   100/(1 + 6/200)^5x2

k=1

Bond Price = 108.53