Question

12 Consider a 5-year bond with a face value of 100 USD/bond that pays coupons ev- ery six months. It has a yield to maturity of 4.0400% and an annual coupon rate of 4.0000%. What is the bond's price if there are no arbitrage opportunities? (Input your answer with 4 decimals)

Answer 1

Bond price=$99.8129

The solution is provided in the images attached.

ANSWER D As the bend pays sense semio annually = ) Years to maturity = 5x2= 10 periods Coupon payment = 100 x 4 = $2 100 2 Face value = $100 Yield to Maturity = 4.04% - 2.02% 2 2 + Bond Price = 2 t (1+0+0202) Cito.0202) ut 2 t (1 +0.0202)10 (1+0x802) Bond price 2 t 2 t 1-0202) (16202) it 2 + 100 Ci« 0202)10_c1•0202)!

Bond price=2 t I + 1.0202 (-0202) -22 10 1.0202 Go0202 1.02oz + L + 100 1•0202)' 1-0202) +81.8741 :) i 1.0202 = 2 +8 1.8741 70-9801) 9801) (-0.1812 (0.9801-1). +91-8741 = (1-9602) (-0.1812 -0.0198 I 17.9388+81-8741 Bond price =99.8129 Bond price = $ 99.8129