Question
Asked Nov 23, 2019
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Calculate the price of a 6.5 percent coupon bond with 27 years left to maturity and a market interest rate of 5 percent. (Assume interest payments are semiannual and par value is $1,000.) Is this a discount or premium bond?

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Expert Answer

Step 1

Calculation of Bond Price:

The bond price is $693.77.

Excel Spreadsheet:

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А В 1Face Value 2 Coupon Payment 3 Yield to Maturity $1,000 $32.50 2.50% 4 Number of Periods 54 Bond Price 5 $693.77

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Step 2

Excel Workings:

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В 1000 2 Coupon Payment B1*(6.5°%/2) 1 Face Vahue =5%/2 3 Yield to Maturity 4 Number of Periods 27*2 Bond Price |=PV(B3,B4,B2,B1)

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