1. What is the price of a $1,000 par value bond with an 8% coupon rate paid...

1. What is the price of a $1,000 par value bond with an 8% coupon rate paid annually, if the bond is priced to yield 8% and has 9 years to maturity?

2. What would be the price of the bond in #1 if the yield decreased to 6%?

3. What would be the price of the bond in #1 if the yield rose to 10% and was callable at 110% of par in 4 years?

4. What is the yield to maturity for a Zero Coupon Bond that has 15 years left to maturity and is selling for $209?

Solutions

Expert Solution

What is the price of a $1,000 par value bond with an 8% coupon rate paid annually, if the bond is priced to yield 8% and has 9 years to maturity?

Answer is $1000

As the YTM and Coupon Rate is Same the issue will bw at face value

What would be the price of the bond in #1 if the yield decreased to 6%?

	Amount	PV factor	PV
Interest Payment	80	6.8017	544.14
Maturity Value	1000	0.5919	591.90
	Value of Bond		1,136.03

. What would be the price of the bond in #1 if the yield rose to 10% and was callable at 110% of par in 4 years?

	Amount	PV factor	PV
Interest Payment	80	3.1699	253.59
Maturity Value	1100	0.6830	751.31
	Value of Bond		1,004.90

What is the yield to maturity for a Zero Coupon Bond that has 15 years left to maturity and is selling for $209?

RATE = ?

NPER=15

PMT =0

PV=-209

FV=1000

=RATE(15,0,-209,1000)

=11.00%

jeff jeffy answered 1 year ago

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