Independent solution

How to solve this Bond Price question

Setup

Setup

Convert the 10% nominal annual yield to 5% per half-year. The forty remaining coupon periods each pay 45, followed by redemption of 1,200.

j=0.10/2=0.05,C=45j=0.10/2=0.05,\quad C=45

Model

Model

Price is the sum of the coupon annuity present value and the discounted redemption value at the same half-year yield.

P=45a40‾∣ 0.05+1200(1.05)−40P=45a_{\overline{40}|\,0.05}+1200(1.05)^{-40}

Compute

Compute

Evaluation gives 942.61. The listed whole-unit price is 943.

P=942.61P=942.61

Answer

Answer

The calculation gives 943 for bond price, matching published choice B.

P=943(B)\boxed{P=943\quad\text{(B)}}

Calculator reproduction

BA II Plus keystrokes

Check END/BGN, period, sign, TVM, and cash-flow setup

  1. 2nd CLR TVM; 40 N; 5 I/Y; 45 PMT; 1200 FV; CPT PV−942.61Use half-year periods and END mode.