Question #1A bond with 7yrs. to maturity and a coupon rate of 13% has

QUESTION

Question #1A bond with 7yrs. to maturity and a coupon rate of 13% has a par, or face, value of $21,000. Interest is paid annually. If you require a return of 16% on this bond what is the value of this bond to you? (round answer to the nearest cent) *Answer is dollar amountQuestion #2Yield to Maturit¦
(1) Face Value Fv of bond = $1000 Maturity = 7yrs. So it has nper = 7periods Coupon 13% . SO PMT = 13%*$1000 = $130 Reqd Return =YTM = Rate = 16% Annual So Present Value of Bond is given by PV = PV(Rate, nper, PMT,FV) ie PV = PV(16%,7,130,1000) = ($878.84) ¦¦¦¦¦¦.Ans (1) Negative sign indicates that you wil have a cash outflow when youbuy the bond which is natural 🙂 (2) Face Value Fv¦

of bond = $1000 Maturity = 10yrs. So it has nper = 10periods Coupon 15% . SO PMT = 15%*$1000 = $150 PV of bond is $1378.83 What is YTM = Rate We have excel function Rate = Rate(nper,PMT,PV,FV) ie YTM = Rate(10,150,-1378.83,1000) = 9.077%¦¦¦¦¦¦¦Ans (2)

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