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Find the current price of a 3-year coupon bond which has a face value of 1000 TL, 5% coupon payment and 6% yield to maturity? (20 pt)
Find the current price of a 3-year coupon bond which has a face value of 1000 TL, 5% coupon payment and 6% yield to maturity? (20 pt)
Expert Solution
Answer:
Bond Price = C * (1- (1 +r)^-n/r) + F/(1 + r)^n
Where,
C = Coupon payment
r = YTM
F = Face value
n = Time perion
Coupon = 1000*5% = 50
Bond price = 50 * (1- (1 +6%)^-3/6%) + 1000/(1 + 6%)^3
= 50 * (1- (1.06)^-3/0.06) + 1000/(1.06)^3
= 50* (1-0.83)/0.06+ 1000/1.1910
= 50*2.673 + 839.61 = 133 + 839.61 = 973
Bond price = 973
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