Question

# ​(Bond valuation​) ​Hamilton, Inc. bonds have a coupon rate of 15 percent. The interest is paid​...

​(Bond valuation​) ​Hamilton, Inc. bonds have a coupon rate of 15 percent. The interest is paid​ semiannually, and the bonds mature in 15 years. Their par value is ​\$1 000. If your required rate of return is 12 ​percent, what is the value of the​ bond? What is the value if the interest is paid​ annually?

a. if the interest is paid semiannually, the value of the bond is?

We have to use PV function in EXCEL to find the value of the bond

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

a. If interest is paid semi-annually (2 periods in a year)

rate=required rate of return/2=12%/2=6%

nper=total number of periods=2*Years of maturity=2*15=30

pmt=semi-annual coupon payment=(coupon rate*face value)/2=(15%*1000)/2=150/2=75

fv=face value=1000

=PV(6%,30,75,1000,0)=\$1206.47

Value of the bond if interest is paid semi-annually=\$1206.47

b. If interest is paid annually,

rate=required arte of return=12%

nper=maturity years=15

pmt=annual coupon payment=150

fv=1000

=PV(12%,15,150,1000,0)=\$1204.33

Value of the bond if interest is paid annually=\$1204.33

#### Earn Coins

Coins can be redeemed for fabulous gifts.