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29 October, 12:51

ABC Company Bonds are trading on the open market. Currently the market yield rate or YTM is 6.5%. The coupon rate on the ABC Bonds is at 6.25%. These bonds mature in 20 years. What would be the price quote of these bonds

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  1. 29 October, 13:30
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    The price quote of the bond is $972.45

    Explanation:

    The price of the bond can be computed using the pv value formula in excel which is = -pv (rate, nper, pmt, fv)

    rate is the yield to maturity of 6.5%

    nper is the number of coupon interest payment of the bond which is 20

    pmt is the annual interest payment of the bond i. e $1000*6.25%=$62.5

    The fv is the default face value of a bond at $1000

    =-pv (6.5%,20,62.5,1000)

    pv=$972.45

    The bonds would have a price quote of $972.45

    Obviously the bonds would be issued at discount as yield is higher than coupon rate
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Home » Business » ABC Company Bonds are trading on the open market. Currently the market yield rate or YTM is 6.5%. The coupon rate on the ABC Bonds is at 6.25%. These bonds mature in 20 years. What would be the price quote of these bonds
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