Question

You see a person drop envelope at a busy airport there's a better than 85% chance that she can catch the person who dropped it if you wanted to but it would take a running effort by you because it is a busy airport there's also the possibility that someone else saw the envelope dropped and could see you pick it up but they would not know what it contained. it turns out that the envelope contains 10 registered bonds and 10 bearer bonds all with the coupon rate of 9.328% the bonds pays interest semiannually and have five years left to maturity. the yeild to maturity is 7.50%

what is the present value of all the bonds?

what is the present value of one of the bonds?

Answer 1

Face value (FV)= 1000
Semiannual payment (PMT) = 1000 * 9.328% / 2 = 46.64
Number of periods (Nper) = 5 * 2 = 10
Semiannual yield (Rate) = 7.50% / 2 = 3.75%

Present value of one of the bond can be calculated by using the following excel formula:
=PV(rate,nper,pmt,fv)
=PV(3.75%,10,-46.64,-1000)
= $1,075.06

Present value of one of the bond = $1,075.06

Present value of all of the bonds = Present value of one of the bond * Number of bond
= $1,075.06 * 20
= $21,501.30

Present value of all of the bonds = $21,501.30

Present value of one of the bond = $1,075.06