Motto: I am proud to be a Cloverdale Cowboy, and the future of America. I have respect for myself, others, and property. There is no limit to what I can achieve. I promise to accept the challenges that will make me a leader of tomorrow. Welcome to Cloverdale Elementary School.
The present value of the face value (i.e. the maturity value) is calculated as follows: Therefore, the price of a bond is given by the following formula: Example 1: Bond with annual coupon payments. Company A has issued a bond having face value of $100,000 carrying annual coupon rate of 8% and maturing in 10 years. The market interest rate is 10%. The price of the bond is calculated as the present value of all future cash flows: Example 2: Bond with semiannual coupon payments. Company S has issued a bond having face value of $100,000 carrying coupon rate of 9% to be paid semiannually and maturing in 10 years.
Let's say the annual interest paid is $50. The current yield of the bond is the interest divided by the current price of the bond, which in this case is $50/$900, or 5.56%. On redemption of the bond after five years, you get the face value of $1000 for the matured bond and realize $100 in capital gain.ield to maturity is a useful measure of the attractiveness of a seasoned bond that is held to maturity and redeemed at par value. For example, suppose you buy a $1000 par value ABC Company bond with a 5% coupon rate maturing in five years, and the market price for the bond is $900.