A) What is the price of a bond (to the nearest cent) with 6 years to maturity, 3

Question

A) What is the price of a bond (to the nearest cent) with 6 years to maturity, 3.7% coupon rate, semiannual payments, par of $1000, and the yield to maturity of 3.59%?
B) 2 years ago, you paid $1130 for a 10-year, $1,000 par bond with a 5.4% coupon rate and semiannual payments. You are selling the bond today when its yield to maturity is 4%. What is the selling price today, to the nearest $0.01?
C) 4 years ago, you paid $922 for a $1,000 par bond that has a 5% coupon with semiannual payments. You are selling it today for $948. You reinvested coupons at the 3.8% annual rate. What is your total return? (Report your answer to two decimals, without the % symbol. E.g., if your answer is 5.1538%, enter it as 5.15.) A) What is the price of a bond (to the nearest cent) with 6 years to maturity, 3.7% coupon rate, semiannual payments, par of $1000, and the yield to maturity of 3.59%?
B) 2 years ago, you paid $1130 for a 10-year, $1,000 par bond with a 5.4% coupon rate and semiannual payments. You are selling the bond today when its yield to maturity is 4%. What is the selling price today, to the nearest $0.01?
C) 4 years ago, you paid $922 for a $1,000 par bond that has a 5% coupon with semiannual payments. You are selling it today for $948. You reinvested coupons at the 3.8% annual rate. What is your total return? (Report your answer to two decimals, without the % symbol. E.g., if your answer is 5.1538%, enter it as 5.15.)

Explanation / Answer

Answer to Question A:

Face Value = $1,000

Annual Coupon Rate = 3.70%
Semiannual Coupon Rate = 1.85%
Semiannual Coupon = 1.85% * $1,000
Semiannual Coupon = $18.50

Annual YTM = 3.59%
Semiannual YTM = 1.795%

Time to Maturity = 6 years
Semiannual Period to Maturity = 12

Price of Bond = $18.50 * PVIFA(1.795%, 12) + $1,000 * PVIF(1.795%, 12)
Price of Bond = $18.50 * (1 - (1/1.01795)^12) / 0.01795 + $1,000 / 1.01795^12
Price of Bond = $1,005.89

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