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​(Bond valuation​) At the beginning of the​ year, you bought a ​$ 1,000 par value corporate...

​(Bond valuation​) At the beginning of the​ year, you bought a ​$ 1,000 par value corporate bond with an annual coupon rate of 14 percent and a maturity date of 15 years. When you bought the​ bond, it had an expected yield to maturity of 16 percent. Today the bond sells for ​$ 1,000. a. What did you pay for the​ bond? b. If you sold the bond at the end of the​ year, what would be your​ one-period return on the​ investment? Assume that you did not receive any interest payment during the holding period. a. The price you paid for the bond is ​$ nothing . ​(Round to the nearest​ cent.)

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Answer #1

Ans:- we will use the PV function of excel to find the price of the bond.

For Price, Rate=16%, Nper=15, Pmt=-$1000*14%=-$140, FV=-$1000.

Return on the bond = [ Selling Price - Purchase Price ] / Purchase Price.

Note:- If this answer helps you pls give thumbs up.

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