Susan purchased a 7-year, 8% c

Susan purchased a 7-year, 8% corporate bond with semi-annual coupon payment. The par value of the bond is $1,000 and the purchase price is $669.


(a) Write down the equation for bond price calculation. (3 marks)

(b) Use the above equation, input all relevant figures to set the equation including the unknown YTM. (3 marks)

(c) By trial-and-error method to show only one YTM trial working (1?%) and one calculated bond price (Hint: YTM may be higher than 15% and less than 17%, final answer in % and 2 decimal places). Then, what’s the new YTM of the bond if an investor decides to purchase and hold it to maturity? (6 marks)

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