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a company’s bond’s have a face value of 1,000. these bonds carry a 6% coupon, pay...

a company’s bond’s have a face value of 1,000. these bonds carry a 6% coupon, pay interest semi annually and mature in 12 yrs: what is the current vslue of these bonds if the yield to maturity is 8.16%?
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Answer #1

Face value=$1000
Annual coupon rate=6%, as the interest is paid semiannually, the semiannual coupon rate=6%/2=3%
Semiannual coupon payment=Semiannual coupon rate*Face value=3%*$1000=$30
Annual yield to maturity is 8.16%, semiannual yield to maturity=8.16%/2=4.08%
Maturity period=12, as the interest is paid semiannually, total number of periods=12*2=24
We will use these value and calculate the present value of the bond using excel.

As the present value is a cash outflow, it is shown with a negative sign in excel.

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