Question

Price a 2-yr 5% semiannual coupon bond with a par value of $100 and the yield to maturity (discount rate) is 4.83% per annum.

Round the answer to the nearest 2 decimal points. If your answer is $12.345, enter "12.35" in the answer box.

Answer 1

	Given		Conversion	(Because coupon payment is for every 6 months)
	Par Value	$100
	Semi Annual Coupon Payments	5%	2.5	(5/2)
	Discount rate	4.83%	2.42	(4.83/2)	(Approximately)
	Time	2 Yrs	4 Periods
Period	Year	Cash flows	Discount Factor	Net Cash Flow
1	0.5	(100*2.5%)=2.5	0.9763	2.44075
2	1	(100*2.5%)=2.5	0.9533	2.38325
3	1.5	(100*2.5%)=2.5	0.9307	2.32675
4	2	{(100*2.5%)+100 = 102.5	0.9087	93.14175
			Price(1+2+3+4)	100.2925
	Description
	Price of a bond is sum of all discounted cash flows generated during its term