Question

dpb corporate bonds have a coupon rate of 9.2% APR (sa).

The yeild to maturity is 8.5% APR (Sa). the bonds will mature in 19 years. calculate the price of the bond.

n=38

pmt-46

fv=1000

i=.0425

pv= -1065.42

Step 1

Semi annual payments. Hence the period here is semi annual or half year. Hence,

n = 2 x years to maturity = 2 x 19 = 38

PMT = Payment per period = semi annual coupon = 9.2% / 2 x 1000 = 46

FV = 1000

i = Semi annual yield to maturity = 8.5% / 2 = 4.25%

Step 2

Hence, Price of the bond = - PV (i, n, PMT, FV) ...

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