Annual Bond Solution Strictly Confidential

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Annual Bond Solution
Find the price of the following bonds:

1) Three year 10% annual bond trading at a YTM of 11%

2) Three year 10% annual bond trading at a YTM of 10%

Solution

1) Par 100 2) Par 100

Coupon 10% Coupon 10%
YTM 11% YTM 10%

Time FV DF PV Time FV DF
1 $10.00 0.9009 $9.01 1 $10.00 0.9091
2 $10.00 0.8116 $8.12 2 $10.00 0.8264
3 $110.00 0.7312 $80.43 3 $110.00 0.7513
$97.56
 PV
$9.09
$8.26
$82.64
$100.00