Answer:
Bond price= $1,404.24
Explanation:
Giving the following information:
Face value= $1,000
Number of periods= 8*2= 16
Coupon= 1,000*0.1= $100
YTM= 0.12/2= 0.06
To calculate the price of the bond, we need to use the following formula:
Bond Price= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]
Bond Price= 100*{[1 - (1.06^-16)] / 0.06} + [1,000/1.06^16]
Bond price= 1,010.59 + 393.65
Bond price= $1,404.24
