Question

Kellog Inc. offers a 7 percent coupon bond with semiannual payments and a yield to maturity of 8 percent. The bonds mature in 9 years. What is the price of a $1,000 face value bond?

A) $936.70

B) $578.27

C) $1,223.06

D) $937.53

Answer 1

Price of semiannual bond=Coupon rate*face value/yield to maturity*(1-1/(1+yield to maturity/2)^(2*number of years))+face value/(1+yield to maturity/2)^(2*number of years)=7%*1000/8%*(1-1/(1+8%/2)^(2*9))+1000/(1+8%/2)^(2*9)=936.7035151