Question #283400

**what is the Price of U.S Coupon Bond issued in May 2018 and the Maturity date is May 2020 , with Par value $30 , yearly Coupon payments $5 ,and Interest Rate 7% ?**

Expert's answer

**Solution:**

The price of U.S Coupon Bond = "C\\times \\frac{1-(1+r)^{-n} }{r} +\\frac{F}{(1+r)^{n}}"

Where: C = Coupon = 7"\\%" "\\times" 30 = 2.1

F = Face or par value = 30

r = Coupon rate = 7%

n = period to maturity = 12yrs

Bond price = "2.1\\times \\frac{1-(1+0.07)^{-12} }{0.07} +\\frac{30}{(1+0.07)^{12}}" = 1 – 7.94 + 13.32 = 6.38

The price of U.S Coupon Bond = 6.38

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