A corporation's bonds have a 15 year maturity, a 7% annual coupon paid semi-annually and a...

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A corporation's bonds have a 15 year maturity, a 7% annual coupon paid semi-annually and a...

A corporation's bonds have a 15 year maturity, a 7% annual coupon paid semi-annually and a par value of 1000. The yield to maturity is quoted as 6% in the financial press. What is the bond's price?

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Answer 1

Answer #1

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2

k=1

K =15x2

Bond Price =∑ [(7*1000/200)/(1 + 6/200)^k] + 1000/(1 + 6/200)^15x2

k=1

Bond Price = 1098

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Answer 2

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