Homework Answers
a. Price of the bond is calculated using =PV(rate,nper,pmt,fv) in excel where rate = 13%, semi annual rate = 6.5% = 0.065, nper = 5 years = 5*2 =10 semi annual periods, pmt = 5.6% *1000 = 56 = 56/2 =23. FV =1000
Price of the bond =PV(0.065,10,23,1000)= $698.07
Bond Price = $537.22
b. Semi annual YTM =rate(nper,pmt,pv,fv) =rate(10,23,-698.07,820) = 4.703%
YTM = 4.7703*2 =9.41%
Yield to maturity = 9.41%
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