A $1,000 corporate bond with 10 years to maturity pays a coupon of 8% (semi-annual) and the market required rate of return is a) 7.2% and b) 10%. What is the current selling price for a) and b)? Really lost, not sure how to even approach this. Thanks for the help. Showing your work will help me understand better.
Bond Issuance Price = Present value of Bond face value + PV of Bond annuity payment The PV factors can be found in PV excel tables online. The effective rate used is the market rate 10 yrs semi annual means 20 periods and coupon and market interest rates will be 4% and 3.6% a) Price = 1000 * 0.493 + 40 * 14.085 = 1056 b) Price = 1000 * 0.377 + 40 * 12.46 = 875