Question

An investor is considering the purchase of a $1000 par value bond with an 8% coupon rate (with interest paid semiannually) that matures in 5 years. If the bond is priced to yield 6%. What is the bonds current price?

Answer #1

Period | Cash Flow | Discounting
Factor [1/(1.03^year)] |
PV of Cash
Flows (cash flows*discounting factor) |

1 | 40 | 0.970873786 | 38.83495146 |

2 | 40 | 0.942595909 | 37.70383637 |

3 | 40 | 0.915141659 | 36.60566637 |

4 | 40 | 0.888487048 | 35.53948192 |

5 | 40 | 0.862608784 | 34.50435138 |

6 | 40 | 0.837484257 | 33.49937027 |

7 | 40 | 0.813091511 | 32.52366045 |

8 | 40 | 0.789409234 | 31.57636937 |

9 | 40 | 0.766416732 | 30.65666929 |

10 | 40 | 0.744093915 | 29.7637566 |

10 | 1000 | 0.744093915 | 744.0939149 |

Price
of the Bond =Sum of PVs |
1085.302028 |

#1. Expected Rate of Return: Par Value : $1,000 Coupon Rate : 8%
Maturity period : 5 Years Market Price : 1,110 Instructions: Please
using Trial and Error to find the expected rate of return with
PVIFA and PVIF Table. # 2 : Duration Duration of a zero-coupon bond
equals its maturity. It is only for zero-coupon bonds that duration
and maturity are equal. Indeed, for any bond that pays some cash
flows prior to maturity, its duration will always...

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Coupon Rate : 8%
Maturity period : 5 Years
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Instructions: Please using Trial and Error to find the expected
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following information:
Duration of a zero-coupon bond equals its maturity. It is only
for zero-coupon bonds that duration and maturity are equal. Indeed,
for any bond that pays some cash flows prior to maturity, its
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