A company has just issued a bond with a $1 000 face value and a coupon rate of 5.25%.
The bond has a life of 10 years, pays semi-annual coupons, and has the yield to maturity of 7.5%. You and your friend decided to buy one. You will receive first half of all coupons and your friend will receive the rest of coupons and the Face Value of the bond.
A. How much should be your contribution to the purchase of the bond?
B. What is your friend's contribution?
This solution calculates two separate parties' contributions to a bond with a given face value and coupon rate.