Question

Un bono con valor par de $1,000 paga intereses de 35 dólares cada trimestre y madurará en 10 años. Si la tasa de rendimiento requerida es de 12 por ciento anual, ¿cuánto pagarías por este bono?

Answer 1

A $ 1,000 par value bond pays $ 35 interest each quarter and will mature in 10 years. If the required rate of return is 12 percent per year, how much would you pay for this bonus?

Question in English as per Google translate

Bond face value = 1000

Quarterly coupon = 35.

N = 10 as quarterly coupon, we can calculate period as 10×4=40

R = 12% yearly. As quarterly coupon, interest rate = yearly/4= 3%

Now ideally the bond price should be the present value of expected cash flows from a bond position. This is calculated as:

PV if bond cashflow= ∑(Cn / (1+YTM)n )+ P / (1+i)n

If we substitute c=35 n=40 I =3 p =1000, we can manually calculate bond price.

Or we can substitute these values in financial calculator to find

PV = PRICE OF BOND = $1115.58