Question

1) A 10-year corporate bond has a coupon rate of 6% with annual payments. If interest rates rise to 7% on similar bonds then what is the value of the bond in the marketplace?

2) A 10-year corporate bond has a coupon rate of 6% with annual payments. If interest rates rise to 5% on similar bonds then what is the value of the bond in the marketplace?

Answer 1

1)	Value of a bond is the present value of cash flow from bond which is calculated as follows:
	Value of bond	=	=-pv(rate,nper,pmt,fv)		Where,
		=	$     929.76		pv	=	?
					rate	=	7%
					nper	=	10
					pmt	=	$             60
					fv		$       1,000
2)	Value of a bond is the present value of cash flow from bond which is calculated as follows:
	Value of bond	=	=-pv(rate,nper,pmt,fv)		Where,
		=	$ 1,077.22		pv	=	?
					rate	=	5%
					nper	=	10
					pmt	=	$             60
					fv		$       1,000