Answer:
Bond Price= $1,085.81
Explanation:
Giving the following information:
Coupon= (0.1/2)*1,000=$50
YTM= 0.085/2= 0.0425
Face value= $1,000
Maturity= 8*2= 16 semesters
To calculate the price of the bond, we need to use the following formula:
Bond Price= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]
Bond Price= 50*{[1 - (1.0425^-16)] / 0.0425} + [1,000 / (1.0425^16)]
Bond Price= 572.02 + 513.79
Bond Price= $1,085.81
