A bond has $ $94000$ face value and the coupon rate of the bond is $3\mathrm{.}4\%($APR$),$ The VTM of the bond is $6\mathrm{.}8\%.$ What is the fair price of the bond assuming that the maturity of the bond is $8$ years and the bond pays coupon in every $6$ months?fair price of bond $=$

fair price $=$

$19472\mathrm{.}34+55055\mathrm{.}31=$

$74,527\mathrm{.}65$

ve and the coupon rate of the bond is $3\mathrm{.}4\%($ARR$).$

$\%.$ What is the fair price of the bond assuming

is $8$ years and the bond pays coupon in ever

STEPS:

$(1)$ semi annual coupon payment $$ Annual $12,$ Annual $=3\mathrm{.}4\%94000=3196$

$319612=1,598$

# at seni annual periods $$ y yrs $2=16$ periods

$(3)$ PV at coupon payments $\frac{6\mathrm{.}8\%}{2}=3\mathrm{.}4\%$ per semiann period

$PVof$ annuity $=1,598\frac{[1-(1+0\mathrm{.}034{)}^{-16}]}{0\mathrm{.}034}=19472\mathrm{.}34$

$(4)pv$ of face vawe $=\frac{94,000}{(1+0\mathrm{.}034{)}^{16}}=55055\mathrm{.}31$