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Yumtum Ltd has a 4 year bond outstanding that pays a 6%

coupon rate, paid quarterly. If investors require an 8% return, what price

should the bond sell for?

pur-new-sol

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

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

Here,

PV = Price of bond

Rate = 8%/4 = 2% (quarterly)

Nper = 4*4 = 16 periods (quarterly)

Pmt = Coupon payment = $1,000*6%/4 = $15

FV = $1,000

Substituting the values in formula:

= -pv(2%,16,15,1000)

= $932.11

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