Answer:
Bond Price= $1,195.82
Explanation:
Giving the following information:
Face value= $1,000
YTM= 0.05/2= 0.025
Years tomaturity= 8*2= 16 semesters
Coupon= (0.08/2)*1,000= $40
To calculate the price of the bond, we need to use the following formula:
Bond Price= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]
Bond Price= 40*{[1 - (1.025^-16)] / 0.025} + [1,000/(1.025^16)]
Bond Price= 522.2 + 673.62
Bond Price= $1,195.82
