I was reading up on Bonds here on About.com Why Do Bond Prices and Yields Move in Opposite Directions?
In the second example it offers:
In this example, the opposite scenario occurs. The same company issues Bond A with a coupon of 4%, but this time yields fall. One year later, the company can issue new debt at 3.5%. What happens to the first issue? In this case, the price of Bond A needs to adjust upward as its yield falls in line with the newer issue. Again, Bond A came to the market at $1000 with a coupon of 4%, and its initial yield to maturity is 4%. The following year, the yield on Bond A has moved to 3.5% to match the move in prevailing rates (as reflected in the 3.5% yield on Bond B). Since the coupon stays the same, the price must rise to $1142.75. Due to this increase in price, the yield declines (because the $40 coupon divided by $1142.75 equals 3.5%).
After reading the part I bolded, I tried to compute it on my own:
40 / n = 3.5
40 / .035 = n
n = 1142.8571426
However, they come up with 1142.75. From what I gather its ultimately a fluctuation based on market anyways. But I'd still like to know. If I reverse and do
40 / 1142.85 I get
40 / 1142.75 yields
0.03500328155. So how does one accurately round or compute this? Am I just missing something in my math?