Question

TKF Inc issued a twenty year bond with a 4%. Coupon read we per yer Bondhokers have a vieta matunty of 4.. The price of this band is closest to

Answer 1

ANSWER

As per the given question,

Let the face value of the bond be $1,000

Coupon = 1000 * 0.04/2 = $20

Semi annual yield to maturity = 0.048/2 = 0.024 = 2.4%

Number of payments = 20 years * 2 payments in an year = 40

$Price = \frac{cpn}{r} * \left [ 1 - \frac{1}{(1+r)^{n}} \right ] + \frac{FV}{(1+r)^{n}}$

$Price = \frac{20}{0.024} * \left [ 1 - \frac{1}{(1+0.024)^{40}} \right ] + \frac{1000}{(1+0.024)^{40}}$

$Price = 833.3333333333 * 0.612740809 + 387.2591914849$

$Price = \$897.8765323182$

THANK YOU FOR THE QUESTION......KINDLY RATE...IT HELPS ME A LOT