I understand coupon rates and YTM, but am having difficulty with determining how to find todays price of bonds. I am missing something.
Problem: Investor has 2 bonds that mature in 4 years, both with face value at $1000 with YTM=9.6%. Bond 1 has annual coupon=10%. Bond 2 is zero coupon. If YTM remains 9.6 for 4 years how do I find price today of each bond?© BrainMass Inc. brainmass.com June 3, 2020, 8:51 pm ad1c9bdddf
The price of the bonds will be the present value of the interest and principal. The discounting rate is the YTM.
The annual interest is 1,000X10%=$100
Principal amount is $1,000
The solution explains how to calculate the price of a bond. The expert determines how to find a price of bonds today.