Question

A 20-year, $1,000 par value bond has a 9% semi-annual coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 8 years from now?

a.

$937.7

b.

$956.95

c.

$939.85

d.

$503.21

Answer #1

Coupon = (0.09* 1,000) / 2 = 45

Number of periods = 20 * 2 = 40

Yield to maturity = 9.8662%

Keys to use in a financial calculator: 2nd I/Y 2, FV 1000, N 40, PV -925, PMT 45, CPT I/Y

YTM = 9.8662% / 2 = 4.9331%

Number of periods = 12 * 2 = 24

Price = Coupon * [1 - 1 / (1 + r)^{n}] / r + FV / (1 +
r)^{n}

Price = 45 * [1 - 1 / (1 + 0.049331)^{24}] / 0.049331 +
1,000 / (1 + 0.049331)^{24}

Price = 45 * 13.888888 + 314.847263

**Price = $939.85**

Keys to use in a financial calculator: 2nd I/Y 2, FV 1000, N 24, I/Y 9.8662, PMT 45, CPT PV

A 20-year, $1,000 par value bond has a 9% semi-annual coupon.
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a.
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b.
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c.
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d.
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e.
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bond currently sells for $875. If the yield to maturity remains at
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*Mention the excel functions you used and the value of each
input you entered

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A 10-year corporate bond has an annual coupon of 9% and a par
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b. The bond’s current
yield is 9%.
c. IF the bond’s
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owning the bond will earn a capital GAIN of 11%...

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