Question

 Mark has a Treasury bond that has a par value of ​$50,000

and a coupon rate of 11​%.

The bond has 14 years to maturity. Mark needs to sell the bond and new bonds are currently carrying coupon rates of

9​%.

For what price should Mark sell the bond in this​ situation?

Mark should sell the bond for ??

​(Round to the nearest​ cent.)

Answer 1

Price = PV of future CFs.

Year	CF	PVF @9%	Disc CF
1	$   5,500.00	0.9174	$   5,045.87
2	$   5,500.00	0.8417	$   4,629.24
3	$   5,500.00	0.7722	$   4,247.01
4	$   5,500.00	0.7084	$   3,896.34
5	$   5,500.00	0.6499	$   3,574.62
6	$   5,500.00	0.5963	$   3,279.47
7	$   5,500.00	0.5470	$   3,008.69
8	$   5,500.00	0.5019	$   2,760.26
9	$   5,500.00	0.4604	$   2,532.35
10	$   5,500.00	0.4224	$   2,323.26
11	$   5,500.00	0.3875	$   2,131.43
12	$   5,500.00	0.3555	$   1,955.44
13	$   5,500.00	0.3262	$   1,793.98
14	$   5,500.00	0.2992	$   1,645.86
14	$ 50,000.00	0.2992	$ 14,962.32
Price of Bond			$ 57,786.15

Pls omment, if any further assistance is required.