Question

What is the price of bond when the market interest rate is 8%, 10% and 12%?...

What is the price of bond when the market interest rate is 8%, 10% and 12%? A two-year bond with a 10percent coupon pays the interest annually. Its face value is $1000.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The price of bond needs to be found by using PV function in EXCEL

=PV(rate,nper,pmt,fv,type)

nper=maturity period=2

pmt=coupon payment=(10%*face value)=(10%*1000)=100

fv=1000

a. If interest rate is 8%

=PV(8%,2,100,1000,0)=$1,035.67

The price of the bond=$1,035.67

b. If the interest rate is 10%, which is equal to coupon rate of 10%. Then the price of the bond=face value=$1000

=PV(10%,2,100,1000,0)=$1000.0

The price of the bond=$1000

c. if the interest rate is 12%

=PV(12%,2,100,1000,0)=$966.20

The price of the bond=$966.20

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A bond has three years to maturity. It pays a 10% coupon rate annually, a $1000...
A bond has three years to maturity. It pays a 10% coupon rate annually, a $1000 face value, and the market rate of interest is 8%. What is the duration of the bond?
5. A bond has three years to maturity. It pays a 10% coupon rate annually, a...
5. A bond has three years to maturity. It pays a 10% coupon rate annually, a $1000 face value, and the market rate of interest is 8%. What is the duration of the bond?
The current interest rate is 4%. Face value=$1000. T=8 years. What is the price of a...
The current interest rate is 4%. Face value=$1000. T=8 years. What is the price of a bond with 6% coupon? What is the price a bond with 10% coupon?
Answer the following questions: What should the current market price be for a bond with a...
Answer the following questions: 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...
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...
A five-year corporate bond with a face value of $10,000 pays interest at a coupon rate...
A five-year corporate bond with a face value of $10,000 pays interest at a coupon rate of 5.0%. The required return for investing in this bond is 4.0%. At what market price will the bond sell if the interest is paid semi-annually?
The market price of a bond is $900 for a 10-year bond that pays interest semi-annually...
The market price of a bond is $900 for a 10-year bond that pays interest semi-annually at a coupon rate of 6% per annum. What is the bond’s expected return, stated on an annual basis compounded semi-annually? What is the bond’s expected return, stated on an annual basis compounded annually?  Show steps on how to solve using excel and the formulas used as well as manually how to solve it
Interest rates have the greatest effect on bond prices? A coupon rate of 10% ($1000 face...
Interest rates have the greatest effect on bond prices? A coupon rate of 10% ($1000 face value bond) means that the bond will pay $60 interest every 6 months if the interest is paid semi-annually. True or False A coupon rate of 10% ($1000 face value bond) means that the bond will pay $60 interest every 6 months if the interest is paid semi-annually. True or False
Compute the price of a bond with 8 years to maturity, a coupon rate of 4.8%,...
Compute the price of a bond with 8 years to maturity, a coupon rate of 4.8%, and a market interest rate of 6.5% if the bond pays interest payments semi-annually on the $1,000 par value . $1,100.00 $940.96 $895.24 $599.52
What is the price of a 4​-year, 8% coupon​ rate, $1,000 face value bond that pays...
What is the price of a 4​-year, 8% coupon​ rate, $1,000 face value bond that pays interest quarterly if the yield to maturity on similar bonds is 11.9%​?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT