bond price question

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Joined: Thu Oct 04, 2012 11:12 pm

bond price question

Postby pinalkaria87 » Wed Oct 10, 2012 2:32 pm

Assume the following discount function, which is a set of discount factors: d(0.5) = 0.990, d(1.0) = 0.970, d(1.5) = 0.960, d(2.0) = 0.950. A U.S. Treasury bond pays a semi-annual coupon at a rate of 5.0% per annum and matures with a face value of $1,000 in eighteen months (T = 1.5 years). What is the price of the bond?


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Re: bond price question

Postby content.pristine » Sat Oct 13, 2012 3:04 pm

Hi pinalkaria87,
Since the bond has a semi-annual coupon, the $25. Since the discounting factors are given,
The price of the bond is:
25*0.990+25*0.970+1025*0.96 = 1033
In the future, please mention the exact part of the question where you have a problem so we can address that exact doubt. :)


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