Problem WalkThrough Price and yield An 8 semaannual coupon b

Problem Walk-Through Price and yield An 8% semaannual coupon bond matures in 4 years. The bond has a face value of $1,000 and a current yield of 8.2342% What is the bond\'s price? Round your answer to the nearest cent What is the bond\'s YTM? (Hint: Refer to Footnote 7 for the definition of the current yield and to Table 7.1.) Round your answers to two decimal places.

Solution

current price of the bond = 80/0082342 = 971.5576

b. PV = -971.5576, FV = 1000, N = 8, PMT = 40

use rate function in Excel and multiply by 2

YTM = 8.86%

c. FV = 1000, PMT = 70, , rate = 8%, N = 9

use PV funciton in Excel

price = 937.53