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Calculating the price and YTM of the given bond

A three-year bond has 8.0% coupon rate and a face value of $1000.

(A). If the yield to maturity on the bond is 10%, calculate the price of the bond assuming that the bond makes semi-annual coupon interest payments.

(B). Assuming that this bond trades for $1,112, what is the YTM for this bond assuming that the bond makes semi-annual coupon interest payments? (Compute IRR).

Solution Preview

Please refer attached file for better clarity of formulas in MS Excel.

A)
Coupon amount=PMT=1000*8%/2=$40 semi annual
Number of coupon payments left=NPER=6 semi annual
Required rate of return=RATE=10%/2=5% semi ...

Solution Summary

Solution describes the steps to calculate the price and YTM of the given bond with the help of formulas in MS Excel.

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