Nungesser Corporation’s outstanding bonds have a $1,000 par value, a 9% semiannual coupon, 8 years to maturity, and an 8.5% YTM. What is the bond’s price?

Answer:

The current bond price is calculated using excel sheet:

Step1: Go to excel and click "insert" to insert the function.
Step2: Select the " PV" function as we are finding the current bond price in this case.
Step3: Enter the values as Rate = 8.5%/2; Nper = 8*2; PMT = -45; FV = -1000
Step4: Click "Ok" to get the desired value.

The value comes to "$1028.6"

The Payment is calculated as 9%/2 = 4.5% semi-annual payment.

Coupon payment = 4.5% on face value of the bond
= 4.5% on ($1,000)
= $45

Therefore, the current bond price is $1028.6