Question

1.) Suppose a five-year, $1,000 bond with annual coupons has a price of $900.00 and a yield to maturity of 6.0%. What is the bond's coupon rate?2.) The yield to maturity of a 2 year $1,000 bond with a 8.5% coupon rate and semiannual coupons is 9.1% APR, compounded semi-annually. What must its price be?

Answer 1

1) PMT is 36.26 so coupon rate is 36.26/1000*100 which is equal to 3.626%

2) pmt = 42.5, N = 4, I = 4.55%, FV = 1000 hence PV is $989.25