a). Computation of the price of the bond:-

Rate = 6%/2 = 3% (semiannual)

Number of periods = 2*2 = 4 periods (semiannual)

Coupon payment = $100*5%/2 = $2.5

Lets put the value in calculator:

Mode = END

N= 4

P/Y = 1

C/Y = 1

I/Y = 3%

PMT = 2.5

FV = 100

Compute PV = $98.14

Or you can calculate the price of the bond by using excel formula:

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

= -pv(3%,4,2.5,100)

= $98.14

 

b). Computation of the price of the bond:-

Here,

Rate = 6%

Number of periods = 2 periods

Lets put the value in calculator:

Mode = END

N= 2

P/Y = 1

C/Y = 1

I/Y = 6%

PMT = 0

FV = 100

compute PV = $89

Or you can calculate the price of the bond by using excel formula:

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

=-pv(6%,2,0,100)

= $89