RatedrillBond price
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
A $1,000 bond pays a 2% coupon in two semiannual payments and matures in 22 years. If the market yield to maturity is 1.5% (annual, compounded semiannually), what is the bond's price?
What this problem teaches
Set P/Y = C/Y = 1, so I/Y is the rate per period. Cash you pay out is negative and cash you receive is positive. PV is negative: it is what you pay for the bond.
A hint if you get stuck
Use half-year periods: coupon = c × 1,000 / 2, rate = YTM / 2, N = 2 × years. Price = PV of coupons + PV of the face value.
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