What is the Market Value of a bond with the following characteristics? $20,000,000 Face Value, 5.75% coupon, 10 years to maturity, 7.15% yield, semi-annual pay
Face value=$20,000,000
Coupon rate=5.75%
As the coupon interest payments are done semiannually, semiannual
coupon rate=5.75%/2=0.02875
Semiannual coupon payments=Face value*Semiannual coupon interest rate=$20,000,000*0.02875=$575000
Time to maturity =10 years, as the coupon interest payments are
made semiannually, number of periods=10*2=20 years
Yield to maturity=7.15%
Semiannual yield to maturity=0.03575 or 3.58%
We will use excel to calculate the present value or market value of
the bond.
Market value of the bond=$18,023,699.09, in excel this value is shown as negative because it is a cash outflow.
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