The Nick Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semi-annually.

1. Assuming the appropriate YTM on the Nick bond is 9.0%, then the price that this bond trades for will be closest to:

A. $946 B. $919 C. $1,086 D. $1,000

Answer: B FV = 1000 I = 4.5 (9/2) PMT = 40 (80/2) N = 30 (15 2) Compute PV = 918.56

2. Assuming that this bond trades for $903, then the YTM for this bond is closest to:

A. 8.0% B. 6.8% C. 9.9% D. 9.2% Answer: D

FV = 1000 PMT = 40 (80/2) N = 30 (15 2) PV = -903 Compute I = 4.6027 2 = 9.2054 or 9.2%

What Equations are used to calculate the PV in the final step of both problems?