Question

Please solve.

Suppose a ten-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading for $1,035.26. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.3% APR, what will be the bond's price? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The bond's yield to maturity is %. (Round to two decimal places.)

Answer 1

a.

Calculating APR on Bond,

using TVM Calculation,

I = [PV = -1,035.26, FV = 1,000, PMT = 42, N = 20]

I = 7.88%

b.

Calculating Bond Price,

Using TVM Calculation,

PV = [FV = 1,000, PMT = 42, N = 20, I = 0.093/2]

PV = $942.22