(a)-Asked Price of this Bond
Variables |
Financial Calculator Keys |
Figures |
Par Value/Face Value of the Bond [$1,000] |
FV |
1,000 |
Coupon Amount [$1,000 x 6.203% x ½] |
PMT |
31.015 |
Market Interest Rate or Yield to maturity on the Bond [4.191% x ½] |
1/Y |
2.0955 |
Maturity Period/Time to Maturity [(May 2016 to May 2036) x 2] |
N |
40 |
Bond Price |
PV |
? |
Here, we need to set the above key variables into the financial calculator to find out the Price of the Bond. After entering the above keys in the financial calculator, we get the Price of the Bond (PV) = $1,270.64.
“Hence, the Asked price of this Bond will be $1,270.64”
(b)- Bid price in dollars
Bid price in dollars = Asked Price for the Bond – Change in bid-ask spread in Dollars
= $1,270.64 - [$1,000 x (0.0581 / 100)]
= $1,270.64 – 0.5810
= $1,270.06
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