Amazon has issued 22-year semi-annual coupon bonds that have seven years left until maturity. If the coupon rate is 6.70...
Amazon has issued 22-year semi-annual coupon bonds that have seven years left until maturity. If the coupon rate is 6.70%, and the YTM is 6.80%, what is the current bond price?
Homework Answers
Assuming face value to be $1000
Number of periods = 7 * 2 = 14
Coupon = (0.067 * 1000) / 2 = 33.5
Rate = 6.80% / 2 = 3.4%
Current bond price = Coupon * [1 - 1 / (1 + r)n] / r + FV / (1 + r)n
Current bond price = 33.5 * [1 - 1 / (1 + 0.034)14] / 0.034 + 1000 / (1 + 0.034)14
Current bond price = 33.5 * [1 - 0.626199] / 0.034 + 626.199126
Current bond price = 33.5 * 10.994147 + 626.199126
Current bond price = $994.50
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