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    ediaba's Avatar
    ediaba Posts: 1, Reputation: 1
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    #1

    Apr 20, 2009, 12:52 PM
    what is the current price of a bound
    what is the current price of a bond with $1000 par value with 5 years to maturity and 6% cupon yield to maturity of 8% and interested paid semiannually?
    ascalia's Avatar
    ascalia Posts: 4, Reputation: 1
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    #2

    May 25, 2009, 08:27 AM

    Because of the volatility of the markets, you can use the Duration formula to arrive at an approximate bond price.
    1. Establish the fixed rate of interest (1,000 x .06 divided by 2).
    2. Use the Present Value of $1 table (at 4%) to determine the interest factors to apply to your 10 pay periods.
    3. Use the Present Value of $1 table to determine the interest factor to apply to your maturity proceeds ($1,030) at 4% (10th period).
    4. Add the answers to #2 and #3 to determine the approximate bond price.
    Note: under the search box of your web home page, type "present and future value of $1 tables" (press enter key) - select the second table for your interest factors.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #3

    May 25, 2009, 08:05 PM
    Quote Originally Posted by ascalia View Post
    2. Use the Present Value of $1 table (at 4%) to determine the interest factors to apply to your 10 pay periods.
    3. Use the Present Value of $1 table to determine the interest factor to apply to your maturity proceeds ($1,030) at 4% (10th period).
    Incorrect. First, it doesn't really fully explain what "your 10 pay periods" means. Second, there are two charts and they have to be properly used for the right number. Third, no factor is applied to $1030.

    ediaba, here are some other threads with some expanation of how to figure bonds. Please read over them and try to do your own work first. The last one has the algebraic equations in case you care to use them:

    https://www.askmehelpdesk.com/financ...nd-181604.html
    https://www.askmehelpdesk.com/financ...ds-200150.html
    https://www.askmehelpdesk.com/accoun...ds-193231.html
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