Tutoring and Learning Centre, George Brown College 2014 www.georgebrown.ca/tlc
[2nd] [SET] if display shows 360
[2nd] [SET] if display shows 1/Y
Press [CPT].
Display shows PRI = 103.4300944
Remember that the 103.4300944 value is per $100 at par.
Therefore, for a $5000 bond, the purchase price = 103.4300944 x (5000/100) = 5171.50
The purchase price of the bond is $5171.50.
Practice Problems:
1. A $5000 bond with a coupon rate of 6.5%, payable semi-annually, matures in 10
years. What should be the purchase price of the bond for a yield of 5.8%
compounded semi-annually?
2. A local municipal government issues $1 million bonds with a ten-year maturity
date. Interest on the bonds is 3% payable annually. What is the issue price of the
bonds if the bonds are sold with a 4% yield compounded semi-annually?
3. A $10,000 bond is redeemable at par and bears interest at 10% compounded
semi-annually. What is the purchase price of the bond ten years before maturity if
the market rate is 8% compounded semi-annually?
4. A $50,000, 3.2% bond with annual interest coupons redeemable at par in ten
years is purchased to yield 4% compounded semi-annually. What is the
purchase price?
Answers:
1. $5262.78
2. $918,891.04
3. $11,359.03
4. $46,755.64