Question

Twelve years ago (NPC) issued fifteen year 7.0% semi annual coupon bonds each with a $1000 face value. Since then, interest rates have generally fallen and the yield to maturity on the NPC bonds is now 5.7%. What is the price today of the NPC bond?

Work by hand no financial calculator

Answer 1

	0	1	2	3	4	5	6
Cashflows		35	35	35	35	35	1035
YTM	0.057
Discount Factors		=1/(1+5.7%/2)^1	=1/(1+5.7%/2)^2	=1/(1+5.7%/2)^3	=1/(1+5.7%/2)^4	=1/(1+5.7%/2)^5	=1/(1+5.7%/2)^6
Cashflow * Discount Factors		=D3*D5	=E3*E5	=F3*F5	=G3*G5	=H3*H5	=I3*I5
Price	=SUM(D6:I6)

	0	1	2	3	4	5	6
Cashflows		35	35	35	35	35	1035
YTM	5.70%
Discount Factors		0.97229	0.945347	0.919152	0.893682	0.868917	0.84484
Cashflow * Discount Factors		34.03014	33.08716	32.1703	31.27886	30.41211	874.4089
Price	1035.387