ps5sol - Problem Set #5 Solutions 6. To find the price of...

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Problem Set #5 – Solutions 6. To find the price of this bond, we need to realize that the maturity of the bond is 10 years. The bond was issued one year ago, with 11 years to maturity, so there are 10 years left on the bond. Also, the coupons are semiannual, so we need to use the semiannual interest rate and the number of semiannual periods. For $1000 face value, the coupon will be 78/2=39. The price of the bond is: P=(39/.043)(1-1/1.043 20 )+1000/(1.043 20 )= $947.05 N=10*2=20, PMT=78/2=39, I/Y=8.6/2=4.3%, FV=1000 CPT PV=-947.05 7. Here we are finding the YTM of a semiannual coupon bond. The bond price equation is: P = $1,040 = (46/y)[1-1/(1+y) 20 ] + 1,000/(1+y) 20 y is the semiannual rate. We use the financial calculator to find it. N=2*10=20, PMT=92/2=46, FV=1000, PV=-1040 CPT I/Y=4.298 YTM = 2 × 4.298% = 8.60% 8. Here we need to find the coupon rate of the bond. All we need to do is to set up the bond pricing equation and solve for the coupon payment as follows: P = $1,136.50 =C*(1/.034)(1-1/1.034
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ps5sol - Problem Set #5 Solutions 6. To find the price of...

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