00:01
Hello, so here we have that since the ytm and the coupon of the bond is the same, the bond current price will be equal to the power value.
00:12
So we get our formula p is equal to c times 1 minus 1 plus ytm to the n divided by the ytm plus ytm to the n.
00:26
So here the face value is 1 ,000.
00:28
The coupon rate is 0 .15.
00:31
Or required rate is 0 .15 times maturity, that's n, which is two years, and the annual coupon c is 150.
00:39
So we then plug in and we get p is equal to 150 times, well, one minus 1 plus 0 .15 squared.
00:50
That was going to give us 150 times 1 minus 0 .75614, divided by 15, plus 1 ,000, divided by 1 .15 squared.
01:01
That's going to be approximately equal to $1 ,000.
01:05
So the price of the bond is going to be equal to about $1 ,000.
01:13
And then for part b, we have that the interest rate has dropped.
01:18
The price of the bond is going to go up...