Question

Suppose a ten-year, $1,000 bond with an 8.2% coupon rate and semiannual coupons is trading for $1,035.88. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.8% APR, what will be the bond's price? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The bond's yield to maturity is %. (Round to two decimal places.) b. If the bond's yield to maturity changes to 9.8% APR, what will be the bond's price? The new price for the bond is $ (Round to the nearest cent.)

Answer 1

Calculate yield to maturity and bond price as follows:

10 1000 ДА B 333 Maturity 334 Face value 335 Coupon rate 336 Present value 337 Bond yield to maturity 338 339 a Yield to maturity 340 b Present value 8.20% 1035.88 9.80% 7.68% $899.45

Formulas:

333 10 ДА B Maturity 334 Face value 1000 335 Coupon rate 0.082 336 Present value 1035.88 337 Bond yield to maturity 0.098 338 339 a Yield to maturity =RATE(C333*2,-C334*C335/2,C336,-C334)* 2 340 b Present value =PV(C337/2,C333*2,-C334*C335/2,-C334)