I am currently practicing for a beginners exam in finance. One of the previous exams had the following question:
You own a 2 year, £1000, 7% bond, with semi-annual coupons. If the bond is priced to yield 6%, calculate its value.
I assumed that "is priced to yield 6%" means that I can assume an interest rate of 6%, but I am unsure. I asked the lecturer and he gave me the hint
"This is the same as saying 'if interest rates are currently 6%, what is a bond yielding 7% bond worth?"
When I assume an interest rate of 6 percent, my answer is 1076.
2*(35/1,03) + 2*(35/1,03^2) + 1000/1,03^2 = 1076.54
Is this correct?