Page 7 - Test

10.
Maturity = 10 year

Face Value = $1000

8% annual coupon rate

Semiannual coupon will be 4% * 1000 = $40

Payment will be done through 20 periods of time.

Traded @

1034.74 40 40 40

…
Period 0 1 2 20

20
(a) 40 1
1034.74 = ∗ 1 −
1 +

y = 3.75%

Yield to maturity in APR = 3.75% * 2

YTM = 7.5%

(b) YTM in APR = 9.0%
YTM in semi-annual percentage rate = 4.5%

20
40 1
= ∗ 1 −
4.5% 1 + 4.5%

Bond Prince = $934.96