A semiannual 3-year bond with the coupon of 6.5% has a YTM of 8%. Determine what price an investor should be willing to pay for this bond. (Hint: since the bond is semiannual, pay close attention to coupon payments, periods, and interest rate to be used for discounting bond cashflows; If the bond is currently trading at $935.50, determine whether the bond is overpriced and whether you should buy this bond.
The price of a bond is the present value of the interest and the principal with the YTM being the discounting rate. This bond is a 3 year semi annual bond. The coupon rate is 6.5%. Every sinx months the ...
The solution explains how to calculate the price of a bond.