document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1173160>Question 1173160</A>: <I><SPAN STYLE=\"word-break: break-all;\"> A 1000$,5% bond with annual coupons will be redeemed at the end of 9 years. Find the price to yield (a) 4% </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #850753 by </B><A HREF=/tutors/aboutme.mpl?userid=CPhill><B>CPhill(1959)</B></A><img src=\"/images/stars/stars-12.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=CPhill><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=CPhill><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=850753\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> Okay, let's calculate the bond price for this scenario.\r<BR>\n" );
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document.write( "**Understanding the Bond**\r<BR>\n" );
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document.write( "* **Face Value:** $1,000<BR>\n" );
document.write( "* **Coupon Rate:** 5% per year (paid annually)<BR>\n" );
document.write( "* **Yield to Maturity (YTM):** 4% per year<BR>\n" );
document.write( "* **Redemption at Par:** The bond will be redeemed for its face value ($1,000) at maturity.<BR>\n" );
document.write( "* **Time to Maturity:** 9 years\r<BR>\n" );
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document.write( "**Calculations**\r<BR>\n" );
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document.write( "1.  **Annual Coupon Payment:**<BR>\n" );
document.write( "    * Annual coupon payment: $1,000 \* 0.05 = $50\r<BR>\n" );
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document.write( "2.  **Annual Yield Rate:**<BR>\n" );
document.write( "    * Annual yield rate: 4% or 0.04\r<BR>\n" );
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document.write( "3.  **Number of Periods:**<BR>\n" );
document.write( "    * 9 years (annual payments)\r<BR>\n" );
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document.write( "4.  **Bond Pricing Formula:**\r<BR>\n" );
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document.write( "    * Bond Price = (Coupon Payment \* [1 - (1 + Yield Rate)^-Periods]) / Yield Rate + (Face Value / (1 + Yield Rate)^Periods)\r<BR>\n" );
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document.write( "**Applying the Formula**\r<BR>\n" );
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document.write( "**(a) Yield to Maturity of 4%**\r<BR>\n" );
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document.write( "* Bond Price = ($50 \* [1 - (1 + 0.04)^-9] / 0.04) + ($1,000 / (1 + 0.04)^9)<BR>\n" );
document.write( "* Bond Price = ($50 \* [1 - (1.04)^-9] / 0.04) + ($1,000 / (1.04)^9)<BR>\n" );
document.write( "* Bond Price = ($50 \* [1 - 0.702586] / 0.04) + ($1,000 / 1.423311)<BR>\n" );
document.write( "* Bond Price = ($50 \* [0.297414] / 0.04) + (702.586)<BR>\n" );
document.write( "* Bond Price = ($50 \* 7.43535) + 702.586<BR>\n" );
document.write( "* Bond Price = 371.7675 + 702.586<BR>\n" );
document.write( "* Bond Price = $1074.35 (approximately)\r<BR>\n" );
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document.write( "**Result**\r<BR>\n" );
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document.write( "* (a) The price of the bond to yield 4% is approximately $1,074.35.<BR>\n" );
document.write( " </SPAN>\n" );
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