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Bond Valuation

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Determine the price of a Canadian government bond as of January 1, 2007 with face value F=$1000, YTM of r=5%, a semi annual coupon of 6.375% if the bond matures on December 31, 2011.

i got p= 920.70

with function 1000/(1+0.05/2)^10 + (1000*0.06375/2)/0.05 * [ 1- 1/(1+0.05/2)^10]

however if i follow the formula the mid part should be (1000*0.0675)/0.05 but the answer will be $1060.15 which higher than face value...

which one is right?

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Solution Preview

Since the YTM is lower than the face value, the price will be higher than then ...

Solution Summary

The solution explains how to determine the price of a bond. The semi annual coupon and bond matures are determined.

$2.19
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