The ExecUfind Corporation has issued 20minusyear semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 10% and the current yield to maturity is 12%, what is the firm's current price per bond?

Current price per bond is $849.54

Explanation:

Coupon payment = 1000 x 10% = $100 annually = $50 semiannually

Number of periods = n = 20 years x 2 = 40 periods

Yield to maturity = 12% annually = 6% semiannually

Price of bond is the present value of future cash flows, to calculate Price of the bond use following formula

Price of the Bond = C x [ (1 - (1 + r) ^-n) / r ] + [ F / (1 + r) ^n ]

Price of the Bond = $50 x [ (1 - (1 + 6%) ^-40) / 6% ] + [ $1,000 / (1 + 6%) ^40 ]

Price of the Bond = $50 x [ (1 - (1.06) ^-40) / 0.06 ] + [ $1,000 / (1.06) ^40 ]

Price of the Bond = $752.31 + $97.22

Price of the Bond = $849.54