The 6.9 percent bond of Peters Pickles has a face value of $1,000, a maturity of 15 years, semiannual interest payments, and a yield to maturity of 7.11 percent. What is the current market price of the bond?
A) $1,081.28
B) $987.95
C) $980.82
D) $990.80
E) $952.60
K = Nx2 |
Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
k=1 |
K =15x2 |
Bond Price =∑ [(6.9*1000/200)/(1 + 7.11/200)^k] + 1000/(1 + 7.11/200)^15x2 |
k=1 |
Bond Price = 980.82 |
Using Calculator: press buttons "2ND"+"FV" then assign |
PMT = Par value * coupon %/coupons per year=1000*6.9/(2*100) |
I/Y =7.11/2 |
N =15*2 |
FV =1000 |
CPT PV |
Using Excel |
=PV(rate,nper,pmt,FV,type) |
=PV(7.11/(2*100),2*15,-6.9*1000/(2*100),-1000,) |
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