Answer:
Bond Price is $850.34
Explanation:
Coupon payment = 1000 x 8.8% = $88 / 2 = 44
Number of periods = n = 11 years 2 periods per year = 22 months
Yield to maturity = 11.2% / 2 = 5.6% per six months
Price of bond is the present value of future cash flows, to calculate Price of the bond use following formula:
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
Price of the Bond =$44 x [ ( 1 - ( 1 + 5.6% )^-22 ) / 5.6% ] + [ $1,000 / ( 1 + 5.6% )^22 ]
Price of the Bond = $44 x [ ( 1 - ( 1.056 )^-22 ) / 0.056 ] + [ $1,000 / ( 1.056 )^22 ]
Price of the Bond = $548.76 + $301.57
Price of the Bond = $850.34
