Answer:
$2,189.76
Explanation:
The price of a bond is the present value (PV) of the future cash inflows expected from the bond discounted using the yield to maturity.
The price of the bond can be calculated as follows:
Step 1
PV of interest payment
Interest payment =( 5.94%× $2000)/2
= $59.4
Semi annual yield = 5.1/2 = 2.6%
PV of interest payment
= 59.4× (1-(1.026)^(-20×2))/0.026)
= 59.4 × 24.41400537
=$ 1,450.19
Step 2
PV of redemption value
= 2,000 × (1+0.051)^(-20)
= 2,000 × 0.369781925
= 739.56
Step 3
Price of bond
= $1,450.19 + $739.56
=$2,189.76
