12 years maturity interest is paid annually bonds have $1,000 par value coupon interest rate 8% bonds have YTM of 9% What is the current market price of these bonds?
Calculating a bond price has 2 components:
1) Find the PV of par value of the bond, using the commonly known PV formula.
2)Find the PV of the stream of coupons, using the commonly used Annuity Formula.
3) Add 1 and 2 above together, which is your bond price.
Calculating all of the above, you get:
1 =$35.55 + 2=$57.29, and the total is:
$92.84 per hundred(bond prices are calculated per $100). Simply divide by 100 and multiply by any amount you may have.
+37084 Thanx for your answer! It always helps ME to have a financial person on this site !
