A $1000 bond with an 8.2% coupon rate,coupons paid semiannually,and maturing in six years is currently yielding 7.6% in the market.What is the current price of the bond?

Question

Quizplus · Accepted Answer

The bond's price is calculated using the present value of its future cash flows, which include semiannual coupon payments and the face value at maturity. The coupon payment is $41 (8.2% of $1000 divided by 2), and the yield is 3.8% per period (7.6% annual yield divided by 2). Using the present value formula for each cash flow and summing them gives the bond price of approximately $1,028.48.

A $1000 Bond with an 8