Question

1. What is the value of a $1,000 par value bond that has a 10% annual...

1. What is the value of a $1,000 par value bond that has a 10% annual coupon, and has ten years until maturity if the required rate of return (rd) is 8%.

2. What is the value of a $1,000 par value bond with a 8% coupon, paid semi-annually, which has 10 years until maturity and a required rate return of 12%.

3. What is the value of a zero coupon bond which matures in 20 years if the required rate of return is 8%.

Homework Answers

Answer #1

1. No of coupon payments (N) = 10

Face Value (Future Value) = $1000

Required return (Yield) = 8%.a.

Annual coupon (PMT) = $1000 x 10% = $100

Price of bond = PV of bond = ??

Using financial calculator or PV function in excel,

PV = Price of bond = $ 1134.20

2. No of coupon payments (N) = 20 (10years x 2)

Face Value (Future Value) = $1000

Required return (Yield) = 12% p.a. = 6% per semi-annum

Semi-annual coupon (PMT) = $1000 x 8% x 6/12 = $40

Price of bond = PV of bond = ??

Using financial calculator or PV function in excel,

PV = Price of bond = $ 770.60

3. Value of zero coupon bond = future value / (1+yield)tenure

Value of zero coupon bond = 1000 / (1+8%)20 = $ 214.55

Thumbs up please if satisfied. Thanks :)

Comment for further doubts

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A $1,000 par-value bond with 5 years of maturity pays a 5% coupon rate, paid annually....
A $1,000 par-value bond with 5 years of maturity pays a 5% coupon rate, paid annually. What is the value of the bond if your required rate of return is 5%? 2. A $1,000 par-value bond with 5 years of maturity pays a 5% coupon rate, paid semi-annually. What is the value of the bond if your required rate of return is 5%? 3.  A $1,000 par-value bond with 5 years of maturity pays a 5% coupon rate, paid semi-annually. What...
 ​(Bond valuation) A bond that matures in 20 years has a ​$1,000 par value. The annual...
 ​(Bond valuation) A bond that matures in 20 years has a ​$1,000 par value. The annual coupon interest rate is 7 percent and the​ market's required yield to maturity on a​ comparable-risk bond is 13 percent. What would be the value of this bond if it paid interest​ annually? What would be the value of this bond if it paid interest​ semiannually?
A bond that matures in 11 years has a ​$1,000 par value. The annual coupon interest...
A bond that matures in 11 years has a ​$1,000 par value. The annual coupon interest rate is 9 percent and the​ market's required yield to maturity on a​ comparable-risk bond is 13 percent. What would be the value of this bond if it paid interest​ annually? What would be the value of this bond if it paid interest​ semiannually? a. The value of this bond if it paid interest annually would be? (Round to the nearest​ cent.)
A bond that matures in 20 years has a $1,000 par value. The annual coupon interest...
A bond that matures in 20 years has a $1,000 par value. The annual coupon interest rate is 11 percent and the​ market's required yield to maturity on a​ comparable-risk bond is 15 percent. What would be the value of this bond if it paid interest​ annually? What would be the value of this bond if it paid interest​ semiannually? The value of this bond if it paid interest annually would be $_ The value of this bond if it...
What is the value of a bond that has a par value of $1,000, a coupon...
What is the value of a bond that has a par value of $1,000, a coupon rate of 10.86 percent (paid annually), and that matures in 14 years? Assume a required rate of return on this bond is 9.65 percent. How do I do this in Excel?
What is the value of a bond that has a par value of $1,000, a coupon...
What is the value of a bond that has a par value of $1,000, a coupon rate of 10.83 percent (paid annually), and that matures in 15 years? Assume a required rate of return on this bond is 10.33 percent. Round the answer to two decimal places.
(Bond valuation) A bond that matures in 10years has a $1,000 par value. The annual coupon...
(Bond valuation) A bond that matures in 10years has a $1,000 par value. The annual coupon interest rate is 9 percent and the? market's required yield to maturity on a? comparable-risk bond is 15 percent. What would be the value of this bond if it paid interest? annually? What would be the value of this bond if it paid interest? semiannually?
What should the current market price be for a bond with a $1,000 face value, a...
What should the current market price be for a bond with a $1,000 face value, a 10% coupon rate paid annually, a required rate of return of 12%, and 20 years until maturity? What should the current market price be for a bond with a $1,000 face value, a 10% coupon rate paid annually, a required rate of return of 8%, and 20 years until maturity? What generalizations about bond prices can you make given your answers to #1 and...
What is the value of a bond that has a par value of $1,000, a coupon...
What is the value of a bond that has a par value of $1,000, a coupon rate of 8.85 percent (paid annually), and that matures in 10 years? Assume a required rate of return on this bond is 9.02 percent. Fresh Water, Inc. sold an issue of 13-year $1,000 par value bonds to the public. The bonds have a 8.17 percent coupon rate and pay interest annually. The current market rate of interest on the Fresh Water, Inc. bonds is...
(Related to Checkpoint? 9.4)???(Bond valuation) A bond that matures in 10 years has a $1,000 par...
(Related to Checkpoint? 9.4)???(Bond valuation) A bond that matures in 10 years has a $1,000 par value. The annual coupon interest rate is 9 percent and the?market's required yield to maturity on a? comparable-risk bond is 15 percent. What would be the value of this bond if it paid interest? annually? What would be the value of this bond if it paid interest? semiannually?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT