Math Problem Statement
A $2,000,000 bond was issued on September 10 2015 with a 6 year maturity. Coupon rate is 4.75% and the present YTM is 6.8% p.a. compounded half-yearly. Interest is paid semi annually. How much is the bond worth on 10 March 2018?
Solution
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Math Problem Analysis
Mathematical Concepts
Bond Valuation
Present Value of Cash Flows
Yield to Maturity (YTM)
Time Value of Money
Annuities
Formulas
Present Value of Coupon Payments: PVC = PMT * [1 - (1 + YTM_semi-annual)^(-N_remaining)] / YTM_semi-annual
Present Value of Face Value: PVF = F / (1 + YTM_semi-annual)^N_remaining
Bond Price: Bond Price = PVC + PVF
Theorems
Time Value of Money
Suitable Grade Level
College Level or Finance Professional
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