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Bond outstanding with a coupon rate of 5.66 percent and semi-annual payments. The bond has a yield to maturity of 6.3 percent, a par value of $2,000, and matures in 16 years. What is the quoted price of the bond?

Respuesta :

Answer

Price of bond = 17.96825

Explanation:

Bond price = ∑(C / [tex](1+YTM)^{n}[/tex] )+  P /[tex](1+i)^{n}[/tex]

where

            n = no. of years

            C = Coupon payments

            YTM = interest rate or required yield

             P = Par Value of the bond

put values in above equation

  price = (5.66%/2) × 2000 × (0.31746) + ( 2000 ÷ 4.595×[tex]10^{18}[/tex])

            = 17.96825