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1) I wish to purchase a 20 year bond that has a maturity value of $1000 and makes semiannual interest payments of $40. I require a 10 percent nominal yield to maturity on this investment, what is the maximum price I should be willing to pay for the bond?

2)A bond with a face value of $1000 matures in 12 years and has a 9 percent semiannual coupon. The bond has a nominal yield to maturity of 7.5 percent, and it can be called in 4 years at a call price of $ 1045. What is the bond's nominal yield to call?

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Solution Summary

The maximum price that you should be willing to pay for the bond is determined.

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1) I wish to purchase a 20 year bond that has a maturity value of $1000 and makes semiannual interest payments of $40. I require a 10 percent nominal yield to maturity on this investment, what is the maximum price I should be willing to pay for the bond?

FV = ...

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