Question

A corporate bond has 17 years to maturity, a face value of $1,000, a coupon rate of 5.3% and pays interest semiannually. The annual market interest rate for similar bonds is 3.2% and is quoted as a semi-annually compounded simple interest rate, i.e 1.6% per 6-month period.

What is the price of the bond?

Answer #1

**The current bond price is computed as shown
below:**

**The coupon payment is computed as follows:**

= 5.3% / 2 x $ 1,000 (Since the payments are semi annual, hence divided by 2)

**= $ 26.5**

**YTM is computed as follows:**

= 3.2% / 2 (Since the payments are semi annual, hence divided by 2)

**= 1.6% or 0.016**

**N is computed as follows:**

= 17 x 2 (Since the payments are semi annual, hence multiplied by 2)

**= 34**

**So, the price of the bond will be computed as
follows:**

**Bonds Price = Coupon payment x [ [ (1 - 1 / (1 +
r)**^{n}**] / r ] + Par
value / (1 + r)**^{n}

= $ 26.50 x [ [ (1 - 1 / (1 + 0.016)^{34} ] / 0.016 ] +
$ 1,000 / 1.016^{34}

= $ 26.50 x 26.06708277 + $ 582.9266756

**= $ 1,273.70 Approximately**

Q2: A corporate bond has 22 years to maturity, a face value of
$1,000, a coupon rate of 5.2% and pays interest semiannually. The
annual market interest rate for similar bonds is 3.3% and is quoted
as a semi-annually compounded simple interest rate, i.e 1.65% per
6-month period.
What is the price of the bond?

A corporate bond has 16 years to maturity, a face value of
$1,000, a coupon rate of 4.6% and pays interest twice a year. The
annual market interest rate for similar bonds is 3.4%.
What is the price of the bond (in $)?
2 years later, the market interest rate for similar bonds has
gone up to 4.4%. What is the new price of the bond (in
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A corporate bond has 2 years to maturity, a coupon rate of 8%, a
face value of $1,000 and pays coupons semiannually. The market
interest rate for similar bonds is 9.5%. Duration is 1.886 years,
NPV is 973.25.
a. If yields fall by 0.8 percentage points,
what is the new expected bond price based on its duration (in
$)?
b. What is the actual bond price after the change in yields (in
$)?
c. What is the difference between the...

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spot rate curve. 6-month spot rate: 3.2%. 12-month: 5%. 18-month:
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Consider a corporate bond with a face value of $1,000, 2 years
to maturity and a coupon rate of 4%. Coupons are paid
semi-annually. The next coupon payment is to be made exactly 6
months from today. What is this bond's price assuming the following
spot rate curve. 6-month spot rate: 3.2%. 12-month: 5%. 18-month:
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20 years from today. The bond pays interest semiannually at a rate
of 8% based on the face value (this means 8%/yr/semi). The interest
rate paid on similar corporate bonds has decreased to a current
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market value of this bond, or what should an investor pay for the
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to maturity and a coupon rate of 5%. Coupons are paid
semi-annually. The next coupon payment is to be made exactly 6
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a. $886.9
b. $940.7
c. $1,065.6
d. $1,138.4
e. $1,219.2

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