Question

7. Pam Smith just inherited a $1,000 face value K-S Inc. bond from her grandmother. The...

7. Pam Smith just inherited a $1,000 face value K-S Inc. bond from her grandmother. The bond clearly indicates a 12% coupon rate, but the maturity date has been smudged and can’t be read. Pam called a broker and determined that similar bonds are currently returning about 8% and that her bond is selling for $1326.58. How many more interest payments can Pam expect to receive on her inherited bond?

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Answer #1

- Face Value of Bond = $1000

Semi-annual Coupon Payments = $1000*12%*1/2 = $60

Current price = $1326.58

Semi-annual YTM = 8%/2 = 4%

Calculating the Number of Coupon payments that are left to be paid using Excel "NPER" function:-

So, no of semi-annual Coupon paymnet that will be received are 27

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