I'm trying to calculate the current price of a corporate bond one year after its YTM has changed.
A corporate bond was issued at 01/01/2010, has the following caracteristics:
- A face value of 5000$.
- A duration of 6 years.
- A coupon rate of 7%.
- A YTM of 7.53%.
- What is the price of the bond?
- If at 01/01/2011 the YTM increases to 9%, what will the new price be?
- Bond Price = 350/(1+0.0753) +...+ 350/(1+0.0753)^6 + 5000/(1+0.0753)^6 = 4875.727183
where: 350 = 5000*0.07
- One of the formulas used to calculate the current market price of the bond is:
Current Market Price of Bond = Annual Interest Payment/Current Yield.
But this formula doesn't take the remaining years of the corporate bond into account. How should I go about calculating the bond's current market price in this situation?
Thanks in advance.