Question

par value. coupon rate. year to m. yield to m. price $1,000.00        8%                5.         &

par value. coupon rate. year to m. yield to m. price
$1,000.00        8%                5.             12%              ?
$5,000.00.       6%               15.            7%                ?
$5,000.00.       12%              5.             11?               ?
$1,000.00.        5.                  5.             5%                ?

FIND the price for the bond in the following table:

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Homework Answers

Answer #1

a)

Coupon = 0.08 * 1000 = 80

Price = Coupon * [1 - 1 / (1 + r)n ]/ r + FV / (1 + r)n

Price = 80 * [1 - 1 / (1 + 0.12)5] / 0.12 + 1000 / (1 + 0.12)5

Price = 80 * 3.60478 + 567.42686

Price = $855.81

b)

Coupon = 0.06 * 5000 = 300

Price = Coupon * [1 - 1 / (1 + r)n ]/ r + FV / (1 + r)n

Price = 300 * [1 - 1 / (1 + 0.07)15] / 0.07 + 5000 / (1 + 0.07)15

Price = 300 * 9.10791 + 1,812.2301

Price = $4,544.60

c)

Coupon = 0.12 * 5000 = 600

Price = Coupon * [1 - 1 / (1 + r)n ]/ r + FV / (1 + r)n

Price = 600 * [1 - 1 / (1 + 0.11)5] / 0.11 + 5000 / (1 + 0.11)5

Price = 600 * 3.6959 + 2,967.25664

Price = $5,184.79

d)

Here, since coupon rate is equal to yield to maturity, price will be equal to the par value.

Price = $1,000

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