Question

N=2 year $2000 6% bond with quarterly coupons has redemption value $2050. It is purchased to...

N=2 year $2000 6% bond with quarterly coupons has redemption value $2050. It is purchased to yield 5% convertible quarterly. Construct a bond amortization table for the n = 8 quarters.

Hint: show first that purchase price is P = 2083.11 (rounded).

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Answer #1
n = 8
I = 1.25%
Cashflows Amount PVf Present value
Quarterly Interest 30 7.56812 227.0436
Redemption value 2050 0.905398 1856.066
Price of bonds 2083.11
Amort Chart:
Period Cash Int Int exp Premium Unamortized Carrying value
Amortized Premium
0 83.11 2083.11
1 30 26.04 3.96 79.15 2079.15
2 30 25.99 4.01 75.14 2075.14
3 30 25.94 4.06 71.08 2071.08
4 30 25.89 4.11 66.97 2066.97
5 30 25.84 4.16 62.80 2062.80
6 30 25.79 4.21 58.59 2058.59
7 30 25.73 4.27 54.32 2054.32
8 30 25.68 4.32 50.00 2050.00
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