Suppose that a bond has a face value of ₱ 100,000 and its maturity date is 10 years from now. The coupon rate is 5% payable semi-annually. Find the price of the bond, assuming that the required yield is 4%.

Bond Price= $108,175.71

Step-by-step explanation:

Giving the following information:

Face value= $100,000

Coupon rate= 0.05/2= 0.025

YTM= 0.04/2= 0.02

Time period= 10*2= 20 semesters

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= 2,500*{[1 - (1.02^-20)] / 0.02} + [100,000/(1.02^20)]

Bond Price=  40,878.58 + 67,297.13

Bond Price= $108,175.71

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