Question

do not round

B estion Scoo t ere ctors Acceptance Corporation dabond with 10 years at a face value of $1,000, and a pon rate of payments) The yield to maturity on this bond when it was sued was 8.1 What was When it was wed, the price of the band was found to the nearest cant)

Answer 1

Price of the bond is the present value of future cash flows.
Present value of coupon payments		$     571.38
Present value of Par Value		$     553.15
Present value of cash flows		$ 1,124.53
So, price of bond is $ 1,124.53
Working:
Coupon Payment	=	Face Value	*	Coupon rate
	=	$ 1,000.00	*	7.80%
	=	$       78.00
Present value of annuity of 1	=	(1-(1+i)^-n)/i		Where,
	=	(1-(1+0.061)^-10)/0.061		i	=	6.10%
	=	7.3253421		n	=	10
Present value of 1	=	(1+i)^-n
	=	(1+0.0610)^-10
	=	0.5531541
Present value of coupon payments	=	Coupon Payment	*	Present value of annuity of 1
	=	$       78.00	*	7.325342
	=	$     571.38
Present value of Par Value	=	Face Value	*	Present value of 1
	=	$ 1,000.00	*	0.553154
	=	$     553.15