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Calculate Bond price : In reference to problem above, If borrower (corporation) has financial issues and...

  1. Calculate Bond price :
    1. In reference to problem above, If borrower (corporation) has financial issues and the company gets downgraded by rating agencies (like Moody’s or Fitch) and the YTM goes up to 6 %. Calculate the price of the bond with this higher risk situation ( hence higher YTM)
  1. Calculate expected rate ( Yield to maturity) :
    • Bond Price : 900
    • N= 10 years
    • Coupon rate : 6 % ( Annual payments)
    • Par Value : 1000
    • YTM: ? ( Hint Use “RATE” from Excel financial formulas)

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Answer #1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

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