Find the current price of the bond

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Currently, a bond has the face value of $1,000, the remaining term of 2 years the coupon interest to be paid every six months and its coupon rate is set as follows:

The coupon rate = the annual yield on 10-year GOC bond, prevailing at the time of payment (call it X) + 3.5%

Suppose the required yield to maturity of the bond is 7% per annum and it is expected to stay the same. X is expected to be 3%, 4%, 4.5% and 5% at the end of the 1st6 month period, 2nd6 month period, 3rd6 month period and 4th6 month period respectively. Find the current price of the bond.

Reference no: EM132375642

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