A bond has 5 years to maturity and has a YTM of 8%. Its par value...

Question

Question

A bond has 5 years to maturity and has a YTM of 8%. Its par value is $5,000. Its semiannual coupons are $250. What is the bonds current market price?

Answer 1

Answer #1

Information provided:

Par value= future value= $5,000

Time= 5 years*2= 10 semi-annual period

Yield to maturity= 8%/2= 4% per semi-annual period

Semi-annual coupon payment= $250

The current market price of the bond is calculated by computing the present value pf the bond.

Enter the below to compute the present value:

FV= 5,000

N= 10

I/Y= 4

PMT= 250

Press the CPT key and PV to compute the present value.

The value obtained is $5,405.54.

In case of any query, kindly comment on the solution.

Answer 2

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