Compute the price of a 3.8% coupon bond with 18 years left to maturity and an interest rate of 6.8% semi-annually
Compute the price of a 3.8% coupon bond with 18 years left to maturity and an interest rate of 6.8% semi-annually
The price of Bond is=$69.122. Here are the two formulae that you can use to calculate this, if you wish to verify the price: PV=P{[1 + R]^N - 1.[1 + R]^-N. R^-1}=PV OF $1 PER PERIOD.(This will give you the PV of the stream of coupons)
PV=FV[1 + R]^-N=PV OF $1 IN THE FUTURE(This will give you the PV of $100 par value of the Bond at maturity)
Finally, you have to add the two PV together to get the price of your Bond.
