Question

# Bond prices. Price the bonds from the following table with annual coupon a. Find the price...

Bond prices. Price the bonds from the following table with annual coupon

a. Find the price for the bond in the following​ table:

 Par Value Coupon Rate Years to Maturity Yield to Maturity Price ​\$1,000.00 9​% 30 11​% ​? ​\$1,000.00 10​% 10 8​% ​? ​\$5,000.00 11​% 5 10​% ​? ​\$5,000.00 8​% 5 12​% ​?

Calculation of bond price:

a)

 Particulars Period Cash flows (1) Discount rate @11% (2) Discounted cash flows (3) (1*2) Interest 1-30 1,000*9%=90 8.694 782.46 Principal 30 1000 1/(1.11)^30=0.0437 43.7 Price 826.16

b)

 Particulars Period Cash flows (1) Discount rate @8%(2) Discount cash flows (3) (1*2) Interest 1-10 1,000*10%=100 6.71 671 Principal 10 1,000 1/(1.08)^10=0.463 463 Price 1134
 Particulars Period Cash flow (1) Discount [email protected]% (2) Discounted cash flows (3) (1*2) Interest 1-5 5,000*11%=550 3.791 2085.05 Principal 5 5,000 1/(1.1)^5=0.621 3105 Price 5190.05
 Particulars Period Cash flow (1) Discount rate @12%(2) Discounted cash flows (3) (1*2) Interest 1-5 5,000*8%=400 3.605 1442 Principal 5 5,000 1/(1.12)^5=0.567 2835 Price 4277

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