A bond matures in 10 years, pays $ 80 each year, and pays $ 1,000 at...

A bond matures in 10 years, pays $ 80 each year, and pays $ 1,000 at maturity. Assume that the market interest is 10%. What is the present value of the bond?

Solutions

Expert Solution

Particulars	Cash flow	Discount factor	Discounted cash flow
present value Interest payments-Annuity (10%,10 periods)	$ 80.00	6.14457	$ 491.57
Present value of bond face amount -Present value (10%,10 periods)	$ 1,000.00	0.38554	$ 385.54

Bond price			$ 877.11
Face value			$ 1,000.00
Premium/(Discount)			$ (122.89)

Present value of bond is 877.11

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

A bond pays a coupon rate of 5% annually and matures in 10 years. The principal...

A bond pays a coupon rate of 5% annually and matures in 10 years. The principal is $10,000 and current market price is $8,500. Suppose the yield increases by 0.05% (0.0005, i.e. 5 bps). What is the new bond price? What is the actual change in price? What is the change in price predicted by modified duration formula? Is this change larger or smaller compared to the actual price change in (c)? Why? How would incorporating convexity help improve duration...

Consider a bond that pays a 10.00% semi-annual coupon and matures in 10 years. If the...

Consider a bond that pays a 10.00% semi-annual coupon and matures in 10 years. If the current market value of the bond is $1,200, what is the YTM?

A 7 percent $1,000 bond matures in 6 years, pays interest semiannually, and has a yield...

A 7 percent $1,000 bond matures in 6 years, pays interest semiannually, and has a yield to maturity of 6.93 percent. What is the current market price of the bond? If the yield to maturity increased by 0.25%, what would happen to the price of the bond?

A coupon bond that pays interest annually has a par value of $1,000, matures in 10 years, and has a yield to maturity of 8%.

A coupon bond that pays interest annually has a par value of $1,000, matures in 10 years, and has a yield to maturity of 8%. Calculate the intrinsic value (price) of the bond today if the coupon rate is 9%.

A bond with 10 years to maturity has a face value of $1,000. The bond pays an...

A bond with 10 years to maturity has a face value of $1,000. The bond pays an 8 percent semiannual coupon, and the bond has a 10.8 percent nominal yield to maturity. What is the price of the bond today?

A bond issued with a face value of $1,000 pays a 3% coupon rate and matures...

A bond issued with a face value of $1,000 pays a 3% coupon rate and matures in seven years. If an investor wants a yield of 4%, what is the investor willing to pay for the bond?

A Treasury bond that matures in 10 years has a yield of 4.25%. A 10-year corporate...

A Treasury bond that matures in 10 years has a yield of 4.25%. A 10-year corporate bond has a yield of 9.75%. Assume that the liquidity premium on the corporate bond is 0.55%. What is the default risk premium on the corporate bond? Round your answer to two decimal places. %

A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate...

A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 7.00%. Assume that the liquidity premium on the corporate bond is 0.35%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.

Calculate the value of a bond that matures in 13 years and has a $ 1,000...

Calculate the value of a bond that matures in 13 years and has a $ 1,000 par value. The annual coupon interest rate is 15 percent and the market's required yield to maturity on a comparable-risk bond is 12 percent. The value of the bond is? (round to the nearest cent)

An issue of Australian treasury bonds with par of $1,000 matures in 15 years and pays...

An issue of Australian treasury bonds with par of $1,000 matures in 15 years and pays 8% coupon interest annually. The market price of the bonds is $1,085 and your required rate of return is 10% p.a. Determine the value of the bond to you, given your required rate of return. A. $103.00 B. $108.00 C. $847.88 D. $1,085.00

Subjects