Suppose a ten-year, $1.000 bond with an 8.4% coupon rate and semiannual coupons

Question

Suppose a ten-year, $1.000 bond with an 8.4% coupon rate and semiannual coupons is trading for $1,035.92. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? If the bond's yield to maturity changes to 9.8% APR, what will be the bond's price? What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The bond's yield to maturity is %. (Round to two decimal places.) If the bond's yield to maturity changes to 9 8% APR, what will be the bond's price? The new price for the bond is $ (Round to the nearest cent.)

Explanation / Answer

Ans

1) 7.88% = (F-P/N)+C/F+P/2)

2) $ 912.02

2)

Year Coupon rate @ 4.2% YTM @ 9.8 PVF @ 4.9 semi annually PV 0.5 42 1.05 0.95 40.04 1 42 1.10 0.91 38.17 1.5 42 1.15 0.87 36.39 2 42 1.21 0.83 34.69 2.5 42 1.27 0.79 33.07 3 42 1.33 0.75 31.52 3.5 42 1.40 0.72 30.05 4 42 1.47 0.68 28.64 4.5 42 1.54 0.65 27.31 5 42 1.61 0.62 26.03 5.5 42 1.69 0.59 24.82 6 42 1.78 0.56 23.66 6.5 42 1.86 0.54 22.55 7 42 1.95 0.51 21.50 7.5 42 2.05 0.49 20.49 8 42 2.15 0.47 19.54 8.5 42 2.26 0.44 18.62 9 42 2.37 0.42 17.75 9.5 42 2.48 0.40 16.92 10 42 2.60 0.38 16.13 10 1000 0.38 384.14 912.02

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