Question

A 5% coupon rate bond issues by Google has a face value of $1000, pays interest...

A 5% coupon rate bond issues by Google has a face value of $1000, pays interest semiannually, and will mature in 20 years. If the current market rate is 2% interest compounded semiannually, what is the bond’s price?

Homework Answers

Answer #1

Face Value (FV) = $1,000

Coupon rate = 5%

Interest rate is paid semi-annually.

Coupon payment = ($1,000 * 0.05)/2 = $25

Market interest rate = 2% compounded semiannually

Adjusted market interest rate (i) = 2%/2 = 1%

Time period (n) = 20 * 2 = 40 period

Calculate the Bond Price -

Bond Price = Coupon payment (P/A, i, n) + Face value (P/F, i, n)

Bond Price = $25 (P/A, 1%, 40) + $1,000 (P/F, 1%, 40)

Bond price = ($25 * 32.8347) + ($1,000 * 0.6717)

Bond price = $820.8675 + $671.7

Bond price = $1,492.57

The bond's price is $1,492.57

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A 13-year, 6 percent coupon bond pays interest semiannually. The bond has a face value of...
A 13-year, 6 percent coupon bond pays interest semiannually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield to maturity rises to 5.7 percent from the current rate of 5.5 percent?
A 10-year, 7 percent coupon bond pays interest semiannually. The bond has a face value of...
A 10-year, 7 percent coupon bond pays interest semiannually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield to maturity rises to 6 percent from the current rate of 5.5 percent?
bond has $1,000 face value, 25 years to maturity, 3.6% annual coupon rate. The bond’s current...
bond has $1,000 face value, 25 years to maturity, 3.6% annual coupon rate. The bond’s current price is $948.92. Assuming the bond pays coupons semiannually, what is the bond’s yield to maturity (YTM)?
A firm issues a 5-year par bond with a coupon rate of 10% and a face...
A firm issues a 5-year par bond with a coupon rate of 10% and a face value of $1000. The price of the bond is $900. What is this bond’s yield-to-maturity?
A 16-year, 4.5% coupon bond pays interest semiannually. The bond has a face value of $1,000....
A 16-year, 4.5% coupon bond pays interest semiannually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield to maturity rises to 5.7% from the current rate of 5.5%? PLEASE TRY TO BE A SIMPLE AS POSSIBLE, preferably using excel!
A bond pays 12% semiannually coupon and has 8 years remaining to maturity. The face value...
A bond pays 12% semiannually coupon and has 8 years remaining to maturity. The face value is 1000$ the bond is callable in 5 years for 1,200$ and has a YTC of 14% 1)   Calculate the price of the bond today. 2)   What is the required rate of return on the bond?
A corporate bond has 17 years to maturity, a face value of $1,000, a coupon rate...
A corporate bond has 17 years to maturity, a face value of $1,000, a coupon rate of 5.3% and pays interest semiannually. The annual market interest rate for similar bonds is 3.2% and is quoted as a semi-annually compounded simple interest rate, i.e 1.6% per 6-month period. What is the price of the bond?
A bond has a Face Value of $1000, Coupon rate of 7%, Yield/market interest is 11%....
A bond has a Face Value of $1000, Coupon rate of 7%, Yield/market interest is 11%. The bond has a time to maturity of 9 years. Assuming annual coupon payments, how does a 1% increase in interest rates affect the price of the bond? What is the new price of the bond?
Your company issued a 10 percent coupon rate bond with the face value of $1,000. The...
Your company issued a 10 percent coupon rate bond with the face value of $1,000. The bond pays interest rate semiannually, and the bond has 20-year to maturity, the market required interest rate on the bond is 8 percent. (2 points) What is the current price of this bond?
A callable bond with a $1,000 par value and a 7.5% coupon rate pays interest semiannually....
A callable bond with a $1,000 par value and a 7.5% coupon rate pays interest semiannually. The bond matures in 20 years but is callable in 5 years at a price of $1,100. Today, the bond sells for $1,055.84. What is this bond’s yield to call expressed as a bond equivalent yield? 3.49% 3.90% 6.18% 6.98% 7.80%
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT