Question

You are eyeing an investment in a corporate bond which has a YTM of 15.00%, and a stated rate of interest of 14.00% with a maturity of 2 years. What is the price of this bond? (I am struggling to try and solve this on my ti-84 calculator, so if you could show how to solve it on that, that would be great.)

a. $983.25
	b. $2,805.09
	c. $1,217.71
	d. $869.94

Answer 1

K = Nx2

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

k=1

K =2x2

Bond Price =∑ [(14*1000/200)/(1 + 15/200)^k]     +   1000/(1 + 15/200)^2x2

k=1

Bond Price = 983.25

Using Calculator: press buttons "2ND"+"FV" then assign

PMT = Par value * coupon %/coupons per year=1000*14/(2*100)

I/Y =15/2

N =2*2

FV =1000

CPT PV

Using Excel

=PV(rate,nper,pmt,FV,type)

=PV(15/(2*100),2*2,-14*1000/(2*100),-1000,)