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What is the price of a bond that has a yield to maturity of 10%, a $1,000 par value, 9 years to maturity, and a coupon rate of 8%, paid semi annually? Thank you!

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Jarrod Robel
Jarrod RobelLv2
28 Sep 2019

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A bond has an 8% coupon rate and a $1,000 face value. Coupon is semi-annually and the bond has 8 years to maturity. If investors require a 9% yield, what is the bond's value?

Consider a bond with a face value F a maturity of T years and a coupon rate p%, coupons paid semi annually, with price P.

a) Define the yield to maturity of the bond

b) What does it mean that the bond sells "at parity" (or "at par")

c) Explain why the bond sells at parity when the coupon rate equals the yield to maturity

Yield to maturity. Each of the bonds shown in the following table pays interest annually.

Bond Par Value Coupon Interest Rate Years to Maturity Current Value

A $1,000 9% 8 $820

B 1,000 12% 16 1,000

C 500 12% 12 560

D 1,000 15% 10 1,120

E 1,000 5% 3 900

a. Calculate the yield to maturity (YTM) for each bond.

b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain.

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