a). We can calculate the yield to maturity by using the following formula in excel:-

=rate(nper,pmt,-pv,fv)

Here,

Rate = Yield to maturity (semiannual)

Nper = 10*2 = 20 periods (semiannual)

Pmt = Coupon payment = $1,000*8.3%/2 = $41.50

PV = $1,035.87

FV = $1,000

Substituting the values in formula:

= rate(20,41.50,-1035.87,1000)

= 3.89%

Yield to maturity = Rate * 2

= 3.89% * 2

= 7.78%

 

b). We can calculate the price of the bond by using the following formula in excel:-

=-pv(rate,nper,pmt,fv)

Here,

PV = Price of the bond

Rate = 9.5%/2 = 4.75% (semiannual)

Nper = 10*2 = 20 periods (semiannual)

Pmt = Coupon payment = $1000*8.3%/2 = $41.50

FV = $1,000

Substituting the values in formula:

= -pv(4.75%,20,41.50,1000)

= $923.62