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​%

​?

Homework Answers

Answer #1

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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