What must be the price of a 10000 bond with a 65 coupon rate

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

A. $9727.76

B. $9819.74

C. $10619.63

D. 10754.44

Solution

Answer : A. $9727.76

=> when interest is paid semi-annual then interest rates are reduced to half and period got doubled.

Price of bond = coupon * PVIFA(Yield % , n) + par * PVIF(Yield % , n)

= 10000 * 3.25% * PVIFA(4%,4) + 10000 * PVIF(4% , 4)

=325 * 3.630 + 10000 * 0.855 = $9729.75 OR $9727.76