The formula to calculate the Bond Price is:
\[ \text{Bond Price} = \sum_{k=1}^{n} \frac{cf}{(1+r)^k} \]
Where:
The bond price is the present value of the cash flows generated by the bond, including the coupon payments throughout the bond's life and the principal payment at the end. This calculator helps you determine the current price of a bond based on its face value, coupon rate, coupon frequency, years to maturity, and yield to maturity.
Let's assume the following for Bond A:
Step 1: Determine the face value:
The face value is given as $1,000.
Step 2: Calculate the coupon per period:
\[ \text{Coupon per period} = \frac{1,000 \times 5\%}{1} = $50 \]
Step 3: Determine the years to maturity:
The years to maturity is given as 10 years.
Step 4: Determine the yield to maturity (YTM):
The YTM is given as 8%.
Step 5: Calculate the bond price:
\[ \text{Bond Price} = \sum_{k=1}^{10} \frac{50}{(1+8\%)^k} + \frac{1,050}{(1+8\%)^{10}} = $798.70 \]
Therefore, the bond price for Bond A is approximately $798.70.