Fixed Income Q37

0. An investor who owns a bond with a 10% coupon rate that pays interest semiannually and matures in four years is considering selling it. If the required rate of return on the bond is 12%, the price of the bond per $100 of par value is closest to:

Answer
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Option : A
Explanation : Using a financial calculator, compute the present value as:
N = 4 * 2 = 8, I/Y = 12/2 = 6%, PMT = $10/2 = 5 and FV = $100, CPT PV = ($93.79).
Since the coupon rate is lower than the market rate, the bond is priced at discount

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