Question

A bond that compounds annually has a Face Value of $1,000 and maturity of 15 years. Assume that its coupon rate is 8% and yield to maturity (YTM) is 6.12%. What is this bond’s market price?

Answer 1

Answer: $1181.164

Explanation:

Based on the information given in the question, the interest will be:

= $1,000 × 8%

= $1000 × 0.08

= $80

The current bond price will be calculated as:

=[$80(PVIFA 6.12%,15)] + [$1,000(PVIF 6.12%,15)]

= ($80 × 9.63655) + ($1,000 ×0.41024)

= $770.924 + $410.24

= $1181.164

The bond's bond’s market price is $1181.164