Question

a coupom bond that pays interest of $60 annually and has a par value of $1000,...

a coupom bond that pays interest of $60 annually and has a par value of $1000, matures in 5years and is selling today at an $84.52 discount from par value. what is thr present value?


a coupon bond that pays interest semi- annually has a par value of $1000, matures in 8years and has a yield to maturity of 6%. If the coupon rate is 7% the intrinstic value of the bond today will be?
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Answer #1

Answer a.

Par Value = $1,000
Discount = $84.52

Present Value = Par Value - Discount
Present Value = $1,000 - $84.52
Present Value = $915.48

Answer b.

Par Value = $1,000

Annual Coupon Rate = 7.00%
Semiannual Coupon Rate = 3.50%
Semiannual Coupon = 3.50% * $1,000
Semiannual Coupon = $35

Time to Maturity = 8 years
Semiannual Period = 16

Annual YTM = 6.00%
Semiannual YTM = 3.00%

Intrinsic Value of Bond = $35 * PVIFA(3.00%, 16) + $1,000 * PVIF(3.00%, 16)
Intrinsic Value of Bond = $35 * (1 - (1/1.03)^16) / 0.03 + $1,000 / 1.03^16
Intrinsic Value of Bond = $1,062.81

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