Question

​XiaoKe, Corp. issued a​ bond, which will mature in 13 years. with a coupon rate of 14 ​percent, paying interest semiannually. The​ bond's par value is ​$1,000. ​And, according to this​ company's risk, investors require a rate of return of 13 percent. Answer the following questions.

a. If the interest is paid​ semiannually, the value of the bond is ​$

b. If the interest is paid​ annually, the value of the bond is ​$

Answer 1

Value of the bond = PV of cash flows from it

PVF = 1 / (1+r)^n

r = Interest trate

n = time gap

a
Period	CF	[email protected]%	Disc CF
1	$      70.00	0.9390	$      65.73
2	$      70.00	0.8817	$      61.72
3	$      70.00	0.8278	$      57.95
4	$      70.00	0.7773	$      54.41
5	$      70.00	0.7299	$      51.09
6	$      70.00	0.6853	$      47.97
7	$      70.00	0.6435	$      45.05
8	$      70.00	0.6042	$      42.30
9	$      70.00	0.5674	$      39.71
10	$      70.00	0.5327	$      37.29
11	$      70.00	0.5002	$      35.01
12	$      70.00	0.4697	$      32.88
13	$      70.00	0.4410	$      30.87
14	$      70.00	0.4141	$      28.99
15	$      70.00	0.3888	$      27.22
16	$      70.00	0.3651	$      25.56
17	$      70.00	0.3428	$      24.00
18	$      70.00	0.3219	$      22.53
19	$      70.00	0.3022	$      21.16
20	$      70.00	0.2838	$      19.87
21	$      70.00	0.2665	$      18.65
22	$      70.00	0.2502	$      17.51
23	$      70.00	0.2349	$      16.45
24	$      70.00	0.2206	$      15.44
25	$      70.00	0.2071	$      14.50
26	$      70.00	0.1945	$      13.61
26	$1,000.00	0.1945	$    194.50
Price of the Bond	$1,061.96
b
Year	CF	PVF@13%	Disc CF
1	$    140.00	0.8850	$    123.89
2	$    140.00	0.7831	$    109.64
3	$    140.00	0.6931	$      97.03
4	$    140.00	0.6133	$      85.86
5	$    140.00	0.5428	$      75.99
6	$    140.00	0.4803	$      67.24
7	$    140.00	0.4251	$      59.51
8	$    140.00	0.3762	$      52.66
9	$    140.00	0.3329	$      46.60
10	$    140.00	0.2946	$      41.24
11	$    140.00	0.2607	$      36.50
12	$    140.00	0.2307	$      32.30
13	$    140.00	0.2042	$      28.58
13	$1,000.00	0.2042	$    204.16
Price of the Bond	$1,061.22