Answer:
Bond Price = $149.1136446 million rounded off to $149.11
Explanation:
To calculate the price of the bond today, we will use the formula for the price of the bond. We assume that the interest rate provided is stated in annual terms. As the bond is a semi annual bond, the coupon payment, number of periods and semi annual YTM will be,
Coupon Payment (C) = 180 million * 0.08 * 6/12 = 7.2 million
Total periods (n) = 20 * 2 = 40
r or YTM = 0.1 * 6/12 = 0.05 or 5%
The formula to calculate the price of the bonds today is attached.
Bond Price = 7.2 * [( 1 - (1+0.05)^-40) / 0.05] + 180 / (1+0.05)^40
Bond Price = $149.1136446 million rounded off to $149.11
