What is the price of a 3-year, 8.5 % coupon rate, $ 1,000 face value bond...
What is the price of a 3-year, 8.5 % coupon rate, $ 1,000 face value bond that pays interest quarterly if the yield to maturity on similar bonds is 12.4 %? The price of the bond is $
Homework Answers
Face Value = $1,000
Annual Coupon Rate = 8.50%
Quarterly Coupon Rate = 2.125%
Quarterly Coupon = 2.125% * $1,000
Quarterly Coupon = $21.25
Annual YTM = 12.40%
Quarterly YTM = 3.10%
Time to Maturity = 3 years or 12 quarters
Price of Bond = $21.25 * PVIFA(3.10%, 12) + $1,000 * PVIF(3.10%,
12)
Price of Bond = $21.25 * (1 - (1/1.0310)^12) / 0.0310 + $1,000 /
1.0310^12
Price of Bond = $903.53
The price of the bond is $903.53
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What is the price of a 3-year, 8.5 % coupon rate, $ 1,000 face
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