a 6.00% coupon bonds have 9 years left to maturity. the bond makes annual coupon payments. if the yield to maturity on these bonds is
A 6.00% coupon bonds have 9 years left to maturity. The bonds make annual coupon payments . If the yield to maturity on these bonds is 8.00%, what is the current bond price
Homework Answers
Annual coupon=1000*6%=60
Hence current price=Annual coupon*Present value of annuity factor(8%,9)+1000*Present value of discounting factor(8%,9)
=60*6.24688791+1000*0.500248967
=$875.06(Approx)
NOTE:
1.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
=60*[1-(1.08)^-9]/0.08
=60*6.24688791
2.Present value of discounting factor=1000/1.08^9
=1000*0.500248967
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