Question

 Calculate the value of a bond that matures in 13 years and has a $1,000 par value. The annual coupon interest rate is 11 percent and the​ market's required yield to maturity on a​comparable-risk bond is 13 percent.

The value of the bond is ?

(round to the nearest cent)

Answer 1

Maturity of bond = 13 years

Par value = $1000

Annual coupon rate = 11%

Coupon frequency = annual

Coupon = coupon rate*par value = 11% *1000 = $110

yield to maturity = 13%

Bond price can be calculated using PV function in spreadsheet

PV(rate, number of periods, payment amount, future value, when-due)

Where, rate = yield to maturity = 13%

number of periods = 13 years

payment amount = coupon = $110

future value = par value = $1000

when-due = when is the coupon paid each year = end = 0

Bond price = PV(13%, 13, 110, 1000, 0) = $877.56