Answer:
The answer is $2,174.18
Explanation:
Yield to Maturity is the rate of return that a bondholder is expecting on his bond.
N(Number of years)= 46 years (23x 2)
I/Y(Yield to Maturity) =2.15% (4.3%/2)
PV(Present Value) = $?
PMT(Payment) = 2.45% of $2,000(4.9%/2) = $49
FV(Future value) = $2,000
Using Financial calculator:
The price of the bond is:
$2,174.18
Answer:
$2,174.18
Explanation:
Price of the bond is the present value of all cash flows of the bond. These cash flows include the coupon payment and the maturity payment of the bond. Both of these cash flows discounted and added to calculate the value of the bond.
According to given data
Face value of the bond is $2,000
Coupon payment = C = $2,000 x 4.9% = $98 annually = $49 semiannually
Number of periods = n = 23 years x 2 = 46 period
Market Rate = 4.3% annually = 2.15% semiannually
Price of the bond is calculated by following formula:
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
Price of the Bond = 49 x [ ( 1 - ( 1 + 2.15% )^-46 ) / 2.15% ] + [ $2,000 / ( 1 + 2.15% )^46 ]
Price of the Bond = $2,174.18
