Answer to Question #126430 in Financial Math for Humphrey Msigwa

Question

What is the market price of a U.S. Treasury bond that has a
coupon rate of 9%, a face value of $1,000 and matures exactly
10 years from today if the required yield to maturity is 10%
compounded semiannually

Answer 1

1.Present value of semiannual coupons:

$\frac{90}{0.1}$(1-$\frac{1 }{(1.05)20})$ =$560.7

2.Present value of $1,000 principal:

$\frac{1000} {(1.05)20}$ =$376.89

The price of the bond is the sum of the present values of coupons and principal:

Market Price = $560.7 +$376.89 =$ 937.59