Question

Suppose a​ ten-year, $1,000 bond with an 8.2% coupon rate and semiannual coupons is trading for $1,034.44. a. What is the​ bond's yield to maturity (expressed as an APR with semiannual​ compounding)? b. If the​ bond's yield to maturity changes to 9.5% ​APR, what will be the​ bond's price?

Answer 1

rate positively ..

Ans a)	we have to use financial calculator to solve this
	put in calculator
	FV		1000
	PV		-1034.44
	PMT	1000*8.2%/2	41
	N	10*2	20
	Compute I		3.85%
	APR = 3.85%*2		7.70%
Ans b)	if APR = 9.5%
	therefore semiannual rate = 9.5%/2		4.75%
	Put in financial calculator -
	FV		1000
	PMT		41
	N		20
	I		4.75%
	Compute PV		($917.25)
	Ans =		$917.25