Question

ouphi& Shour ur wort. Coupon rate 6% Face value $1,000 Maturity 10 years Yield to maturity-6.5% a) Assuming this bond pays interest semi-annually, and there is exactly six months until the next coupon payment, find its current price and current yield. b) Assume this bond matures in 9 years and 9 months, find the price and the amount of Saccrued interest. (Assume semi-annual coupons.) c) Assume this bond is callable in eight years at $1,060. Find the bond's yield to call. (Assume there is six months until the next coupon payment.)

Answer 1

a) coupon amount=$ 1000*6%*1/2 = $ 30 , n= 10*2=20 ,to be discounted at 6.5*1/2=3.25% ,current price = PVAF(3.25%,20) *30 + 1000*PVF(3.25%, 20) =$963

Note- assumed that the bond is redeemable at par at maturity.