Question

assume that you were considering the purchase of a 20 year
non-callable bond with an annual coupon rate of 9.5% the bond has a
face value of $1000 and it makes semi annual interest payments. if
you require a 9.5% nominal yield to maturity on this investment
what is the maximum price you should be willing to pay for the
bond?

Answer #1

Information provided:

Face value= future value= $1,000

Time= 20 years*2= 40 semi-annual periods

Coupon rate= 9.5%/2= 4.75.

Coupon payment= 0.0475*1,000= $47.50 per semi-annual period

Yield to maturity= 9.5%/2= 4.75% per semi-annual period

The maximum price of the bond is calculated by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 1,000

PMT= 47.50

I/Y= 4.75

N= 40

Press the CPT key and PV to compute the present value.

The value obtained is 1,000.

Therefore, the maximum price of the
bond is **$1,000.**

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a.
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Assume that you are considering the purchase of a 20-year,
noncallable bond with an annual coupon rate of 9.5%. The bond has a
face value of $1,000, and it makes semiannual interest payments. If
you require an 10.7% nominal yield to maturity on this investment,
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(Please show work and explain formula of how you got this answer
NOT on excel)

Assume that you are considering the purchase of a 20-year,
noncallable bond with an annual coupon rate of 9.5%. The bond has a
face value of $1,000, and it makes semiannual interest payments. If
you require a 10.7% nominal yield to maturity (YTM) on this
investment, what is the maximum price you should be willing to pay
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Provide the correct excel function along with
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