CHAPTER 5: PROBLEM 2 Microsoft has issued a bond with the following characteristics: Par $1000 Coupon rate:7% Semianual payments Calculate the price of this bond if the YTM is 7%

A.

Settlement

(Think of Settlement as the beginning of the duration of the bond.)

Maturity

(Think of Maturity as the end of the duration of the bond.)

Rate

(Coupon Rate)

YTM

(Yield to Maturity or Required Rate of Return)

Redemption

(Bonds Face Value, Par Value, or Fair Price; Note that is $100, not $1,000. You make the adjustments by multiplying the answer by 10.)

Frequency

(Coupon payments are semiannual, so you put in a 2. If they are annual, then you input a 1.)

Basis

(Always leave it blank.)

Bond Price

(The answer. But you need to multiply it by 10 to get the actual bond price.)

Multiply by 10

(Microsoft gives the bond price in 2 digits. You need to multiply it by 10 to get the actual bond price.)