A bond has a coupon rate of 10.2 percent and 3 years until maturity. If the yiel

Question

A bond has a coupon rate of 10.2 percent and 3 years until maturity. If the yield to maturity is 10.4 percent, what is the price of the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

A bond has a coupon rate of 10.2 percent and 3 years until maturity. If the yield to maturity is 10.4 percent, what is the price of the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

YTM= {C+ [(MV-BP) / n]} / [(BP+MV) / 2]

This will provide fast and approx result

where, C= coupon amount

MV= Maturity value

BP= Bond market price

(MV-BP)= Take absolute difference

n= No. of years left in the life of bond

Let Maturity value=100

0.104= {10.2+ [(100-BP) / 3]} / [(BP+100) / 2]

solve it and BP will come to 99.48

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