Question
In: Finance
4.XYZ Corporation issued 10-year bonds a year ago at a coupon rate of 10 percent. The...
4.XYZ Corporation issued 10-year bonds a year ago at a coupon rate
of 10 percent. The bonds make semiannual payments. If the YTM on
these bonds is 7 percent, what is the current bond price?
Solutions
Expert Solution
| Statement showing price of bond: | ||||
| ( In case of semi annual bond, yield= 7/2=3.5%, Coupon rate=10/2=5%, Years=10*2=20 | ||||
| Particulars | Time | PVf @3.5% | Amount | PV |
| Cash Flows (Interest) | 1.00 | 0.9662 | 50.00 | 48.31 |
| Cash Flows (Interest) | 2.00 | 0.9335 | 50.00 | 46.68 |
| Cash Flows (Interest) | 3.00 | 0.9019 | 50.00 | 45.10 |
| Cash Flows (Interest) | 4.00 | 0.8714 | 50.00 | 43.57 |
| Cash Flows (Interest) | 5.00 | 0.8420 | 50.00 | 42.10 |
| Cash Flows (Interest) | 6.00 | 0.8135 | 50.00 | 40.68 |
| Cash Flows (Interest) | 7.00 | 0.7860 | 50.00 | 39.30 |
| Cash Flows (Interest) | 8.00 | 0.7594 | 50.00 | 37.97 |
| Cash Flows (Interest) | 9.00 | 0.7337 | 50.00 | 36.69 |
| Cash Flows (Interest) | 10.00 | 0.7089 | 50.00 | 35.45 |
| Cash Flows (Interest) | 11.00 | 0.6849 | 50.00 | 34.25 |
| Cash Flows (Interest) | 12.00 | 0.6618 | 50.00 | 33.09 |
| Cash Flows (Interest) | 13.00 | 0.6394 | 50.00 | 31.97 |
| Cash Flows (Interest) | 14.00 | 0.6178 | 50.00 | 30.89 |
| Cash Flows (Interest) | 15.00 | 0.5969 | 50.00 | 29.84 |
| Cash Flows (Interest) | 16.00 | 0.5767 | 50.00 | 28.84 |
| Cash Flows (Interest) | 17.00 | 0.5572 | 50.00 | 27.86 |
| Cash Flows (Interest) | 18.00 | 0.5384 | 50.00 | 26.92 |
| Cash Flows (Interest) | 19.00 | 0.5202 | 50.00 | 26.01 |
| Cash Flows (Interest) | 20.00 | 0.5026 | 50.00 | 25.13 |
| Cash flows (Maturity Amount) | 20.00 | 0.5026 | 1,000.00 | 502.60 |
| Fair Price | 1,213.22 | |||
| Price of Bond is $1213.22 | ||||
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