Homework Answers
BOND PRICE = COUPON 1 + COUPON 2 + FACE VALUE
__________ ________ ___________
(1+YTM)1 (1+YTM)2 (1+YTM)n
we will find present value of interest recieved for two years and face valueat the given YTM
interest coupon = 100*1% = 1$ annually
YTM = -0.005 i.e.0.5%
= [1 / (1+-0.005)1] + [1 / (1+-0.005)2] + [100 / (1+-0.005)2]
1/0.995 + 1/0.9900 + 100/0.9900
=1.005+1.010+101.01
=103.03 $ is current value of BOND.
=1012.16
=
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