Oriole Corp. issued a five$-$year bond one year ago with a coupon rate of $8\mathrm{.}0$ percent. The bond pays interest semiannually. If the

yield to maturity on this bond is $11$ percent, what is the price of the bond? $($Round answer to $2$ decimal places, e$.$g$.5,275\mathrm{.}25.)$

Price of bond $

Solution

We can find the price of Oriole Corp.$\text{'}$s bond as follows:

Alternatively, we can use the present value of an ordinary annuity equation and the present value equation to solve for the

price of the bond.

$P_B=C[\frac{1-\frac{1}{(1+\frac{i}{m}{)}^{mn}}}{\frac{i}{m}}]+\frac{F_n}{(1+\frac{i}{m}{)}^{mn}}=$$$40\mathrm{.}00[\frac{1-\frac{1}{(1+0\mathrm{.}055{)}^8}}{0\mathrm{.}055}]+\frac{\text{\$}1,000}{(1\mathrm{.}055{)}^8}$

$=$$$253\mathrm{.}38+$$$651\mathrm{.}60=$$$904\mathrm{.}98$

Financial Calcuator Solution:

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Answer

$-904\mathrm{.}98$

How did find the amount for PMT $=40\mathrm{.}00$