What must be the price of a $10,000 bond with a 6.5% coupon rate,semi-annual coupons,and two years to maturity if it has a yield to maturity of 8% APR?

Question

Quizplus · Accepted Answer

The price of a bond can be calculated using the present value of its future cash flows, which include the semi-annual coupon payments and the face value repayment at maturity. The formula for the present value of an annuity (for the coupon payments) and a lump sum (for the face value repayment) is used. Given a 6.5% annual coupon rate on a $10,000 bond, semi-annual coupons would be $325 ($10,000 * 6.5% / 2). With a yield to maturity of 8% APR, or 4% per semi-annual period, and 4 periods remaining (2 years * 2), the present value of the bond can be calculated. The correct calculation leads to a bond price of approximately $9727.76.

What Must Be the Price of a $10,000 Bond with a 6.5