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The current price of a bond is $950. It has a face value of $1,000, a maturity date of 2 years and pays a 4%

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The current price of a bond is $950. It has a face value of $1,000, a maturity date of 2 years and pays a 4% coupon rate every year. Calculate the price if the yield is 5%, and when it is 9%. Use linear interpolation to estimate the correct yield. C1 C2 Ce+ F P= + (1+r) 1 (1+r)2 (1+r) +... Price is low r= plow + Price correct (high - plow) Price is low Pricer is high

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