Answer:
Bond Price = $927.904476 rounded off to $927.90
Explanation:
To calculate the price of the bond today, we will use the formula for the price of the bond. As the bond is an annual bond, the coupon payment, number of periods and annual YTM will be,
Coupon Payment (C) = 1000 * 0.1 = 100
Total periods (n) = 5
r or YTM = 0.12 or 12%
The formula to calculate the price of the bonds today is attached.
Bond Price = 100 * [( 1 - (1+0.12)^-5) / 0.12] + 1000 / (1+0.12)^5
Bond Price = $927.904476 rounded off to $927.90
