Question

Calculate the current price of a $5,000 par value bond that has a coupon rate of 15 percent, pays coupon interest quarterly (i.e., 4 times per year), has 22 years remaining to maturity, and has a current yield to maturity (discount rate) of 14 percent. (Round your answer to 2 decimal places and record without dollar sign or commas).

Answer 1

K = Nx4

Bond Price =∑ [(Quarterly Coupon)/(1 + YTM/4)^k]     +   Par value/(1 + YTM/4)^Nx4

k=1

K =22x4

Bond Price =∑ [(15*5000/400)/(1 + 14/400)^k]     +   5000/(1 + 14/400)^22x4

k=1

Bond Price = 5339.84