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A 3-year bond of face value 100 pays annual coupons of 9%
A 3-year bond of face value 100 pays annual coupons of 9%. If the yield to maturity is 11%, what is the price of the bond?
Expert Solution
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 = 11%
Nper = 3 periods
Pmt = Coupon payment = 100*9% = 9
FV = 100
Substituting the values in formula:
= -pv(11%,3,9,100)
= 95.11
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