Answer:
Bond Price = $828.4091365 rounded off to $828.41
Explanation:
To calculate the price of the bond today, we will use the formula for the price of the bond. As the bond is a semi annual bond, the coupon payment, number of periods and semi annual YTM will be,
Coupon Payment (C) = 40
Total periods (n) = 20 * 2 = 40
r or YTM = 0.05 or 5%
The formula to calculate the price of the bonds today is attached.
Bond Price = 40 * [( 1 - (1+0.05)^-40) / 0.05] + 1000 / (1+0.05)^40
Bond Price = $828.4091365 rounded off to $828.41
