Question

Calculate the value of a PAR bond if it matures in 5 years and pays 7%...

  1. Calculate the value of a PAR bond if it matures in 5 years and pays 7% semi-annually,   whereas comparable yields in the market point toward 9% (hint: think intrinsic)

   

                  Answer: $647.02

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Homework Answers

Answer #1

Solution:-

To Calculate Value of PAR Bond-

Formula of Calculating Value of Bond-

Value of Bond =

Value of Bond =

Value of Bond = $35 * 0.917 + $35 * 0.842 + $35 * 0.772 + $35 * 0.708 + $35 * 0.650 + $35 * 0.596 + $35 * 0.547 + $35 * 0.502 + $35 * 0.460 + $1,035 * 0.422

Value of Bond = $647.03

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