What is the current price of a $1,000 par value bond maturing in 12 years with a coupon rate of 14 percent, paid semiannually, that has a YTM of 13 percent?

Question

Quizplus · Accepted Answer

Using the bond pricing formula, we can calculate the current price of the bond as follows:

PV = (140/2)/(1+0.13/2) + (140/2)/(1+0.13/2)^2 + ... + (140/2)/(1+0.13/2)^24 + 1000/(1+0.13/2)^24 
PV = $1,060

Therefore, the current price of the bond is $1,060. Choice C is the correct answer.

What Is the Current Price of a $1,000 Par Value