Answer:
$915.11
Explanation:
Given:
n= 6
Face value: $1,000
Rate of coupon: 8.9% => Coupon payment is: 1000*8.9% = $89
YMT = 10.9%
As the know that, current bond price = present value of coupon received annually + present value of bond
Present bond value is: [tex]\frac{1000}{(1+ 0.109)^{6} }[/tex] = $537.5
Present value of coupon received annually: To calculate PV of coupon received, we use excel in formula PV(discounting rate ,Nper,- PMT) = PV(10.9%,6,-89) = $377.61
Hence, the current bond price = $377.61+ $537.5= $915.11
Answer:
Bond price $915.14
Explanation:
Cr 8.9%, n 6, FV $1000 YTM 10.9%
Coupon payment
The bond makes annual payments
C = 1000*8.9%=$89
Bond price equal the present value of coupon payments plus the present value at maturity
= C * [1-(1+r)^-n/r] + FV/(1+r)^n
=89*[1-(1+0.109)^-6/0.109] + 1000/(1+0.109)^6
=377.60 + 537.54
=$915.14
