week 68. Kamins Corporation has two bond issues outstanding, each with

QUESTION

week 68. Kamins Corporation has two bond issues outstanding, each witha par value of $1,000. Information about each follows. Supposemarket interest rates rise 1 percentage point across the yield curve.What will be the change in price for each of the bonds? Does this tellus anything about the relatio¦
a) Calculating the Present value of the bond-A using excel sheet:Annual coupon payment = $1000 * 8% = $80Step1: Go to excel and clickinsert to insert the function.Step2: Select the œPV function as we are finding the present value of the bond in this case.Step3: Enter the values as Rate = 9%; Nper = 5; PMT = -80 ; FV = -1000Step4: Click œOK to get the desired value.The value come to  $961³Therefore, the present value of the bond is $961b) If the market interest rate increased by 1% then the new market interest rate is 10% Step1: Go to excel and clickinsert to insert the function.Step2: Select the œPV function as we are finding the present value of the bond in this case.Step3: Enter the values as Rate = 10%; Nper = 5; PMT = -80 ; FV = -1000Step4: Click œOK to get the desired value.The value come to  $924³Therefore, the present value of the bond is $924Decrease in the value of the bonds is $37 (3.85%) for 1% increase in the market interest rate.Calculating the present value of the Bond-B:Annual coupon payment = $1000 * 8% = $80Step1: Go to excel and clickinsert to insert the function.Step2: Select the œPV function as we are finding the present value of the bond in this case.Step3: Enter the values as Rate = 9%; Nper = 12; PMT¦

= -80 ; FV = -1000Step4: Click “OK” to get the desired value.The value come to ” $928″Therefore, the present value of the bond is $928b) If the market interest rate increased by 1% then the new market interest rate is 10% Step1: Go to excel and cl

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