What is the price of a 4-year bond with a coupon rate of 10% and face value of $1,000? Assume the bond is trading at 10% yield, and that coupons are paid semi-annually. Assume semi-annual compounding.
Round your answer to the nearest cent (2 decimal places).
What is the yield of a 3-year bond with a coupon rate of 9% and face value of $100? Assume the bond is currently trading at a price of $100, and that coupons are paid semi-annually. Assume semi-annual compounding.
Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.
Calculation of Bond Price:
C = coupon rate = 1000 * 10/100 = 100
Kd = Yield rate = 10%
M = maturity value or face value = $1000
n = periods = 4
Bond price =
= C / 2 x PVIFA(Kd/2 %,2n) + M x PVIF (Kd/2 % , 2n ) [PVIFA = Present Value Interest Factor of Annuity]
= 100/2 x PVIFA(K10/2 %,2*4) + $1000 x PVIF (K10/2 % , 2*4 ) [ PVIF = Present Value Interest Factor]
= 50 x PVIFA(K 5%,8) + $1000 x PVIF (K 5 % , 8 )
= 50 x 6.46 + $1000 x 0.68
Calculation Of Bond Yield:
C = coupon rate = 100 * 9/100 = 9
Coupon rate semi annually = 9/2= 4.5
Current price = $100
M = maturity value or face value = $100
Bond Yield = Annual Interest or coupon rate(Semi annual) / Current market price
= 4.5 / $100
= 0.045 or 4.5 %
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