Question

What is the price of a $1000 par value bond with a coupon rate of 11.3% (annual payments) that matures in 22 years, assuming that the bond’s YTM is 4.66% p.a.?

Answer 1

Solving problem with manual formula and calculator both:

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I/Y = R = Rate or yield / frequency of coupon in a year =	4.660000
PMT = Coupon rate x FV / frequency =	$113.00
N = Number of years remaining x frequency =	22.00
FV = Face value =	1000
Formula for bond value: PV = PMT x ((1-((1+R%)^-N)) / R%) + (FV/(1+R%)^N)
PV = (113* ((1-(1+0.0466)^-22)/0.0466) + 1000/(1+0.0466)^22) =	$1,901.77

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Using financial calculator BA II Plus - Input details:	#
I/Y = R = Rate or yield / frequency of coupon in a year =	4.660000
PMT = Coupon rate x FV / frequency =	-$113.00
N = Number of years remaining x frequency =	22.00
FV = Future Value =	-$1,000.00
CPT > PV = Present value of bond = Price of Bond = Current value of bond =	$1,901.77