In: Finance
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?
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
2
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%