Face Value = 1000
Semi -annual coupon amount = 0.05*1000 =50
Number of payments = 12*2 = 24
semi -annual ytm = 0.0957/2 = 0.04785
We know that,
Current Price of a bond = Present value of all the semi annual coupons and face value discounted at semi annual ytm
Price = 50/(1+0.04785)^1 + 50/(1+0.04785)^2 + 50/(1+0.04785)^3 + 50/(1+0.04785)^4 + 50/(1+0.04785)^5 + 50/(1+0.04785)^6 + ............. 50/(1+0.04785)^24 + 1000/(1+0.04785)^24
Price = 1030.30 Answer
YTM Calculation:
1030.29 = 50/(1+ytm/2)^1 + 50/(1+ytm/2)^2 + 50/(1+ytm/2)^3 + 50/(1+ytm/2)^4 + 50/(1+ytm/2)^5 + 50/(1+ytm/2)^6 + ............. 50/(1+ytm/2)^24 + 1000/(1+ytm/2)^24
We will use heat and trial method to get required value
ytm/2 = 4.785
ytm = 9.57% Answer
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