Question

Please show all work.

Assume a par value of $1,000. Caspian Sea plans to issue a 16.00 year, annual pay bond that has a coupon rate of 8.05%. If the yield to maturity for the bond is 7.76%, what will the price of the bond be?

Assume a par value of $1,000. Caspian Sea plans to issue a 20.00 year, annual pay bond that has a coupon rate of 7.85%. If the yield to maturity for the bond is 8.37%, what will the price of the bond be?

Assume a par value of $1,000. Caspian Sea plans to issue a 25.00 year, annual pay bond that has a coupon rate of 11.00%. If the yield to maturity for the bond is 11.0%, what will the price of the bond be?

Answer format: Currency: Round to: 2 decimal places.

Answer 1

Price of Bond = PV of Cash flows from it.

Part A:

Year	CF	PVF @7.76%	Disc CF
1	$        80.50	0.9280	$        74.70
2	$        80.50	0.8612	$        69.32
3	$        80.50	0.7991	$        64.33
4	$        80.50	0.7416	$        59.70
5	$        80.50	0.6882	$        55.40
6	$        80.50	0.6386	$        51.41
7	$        80.50	0.5926	$        47.71
8	$        80.50	0.5500	$        44.27
9	$        80.50	0.5104	$        41.08
10	$        80.50	0.4736	$        38.13
11	$        80.50	0.4395	$        35.38
12	$        80.50	0.4079	$        32.83
13	$        80.50	0.3785	$        30.47
14	$        80.50	0.3512	$        28.27
15	$        80.50	0.3259	$        26.24
16	$        80.50	0.3025	$        24.35
16	$   1,000.00	0.3025	$      302.47
Price of Bond			$   1,026.07

Part B:

Year	CF	PVF @8.37%	Disc CF
1	$        78.50	0.9228	$        72.44
2	$        78.50	0.8515	$        66.84
3	$        78.50	0.7857	$        61.68
4	$        78.50	0.7250	$        56.92
5	$        78.50	0.6690	$        52.52
6	$        78.50	0.6174	$        48.46
7	$        78.50	0.5697	$        44.72
8	$        78.50	0.5257	$        41.27
9	$        78.50	0.4851	$        38.08
10	$        78.50	0.4476	$        35.14
11	$        78.50	0.4130	$        32.42
12	$        78.50	0.3811	$        29.92
13	$        78.50	0.3517	$        27.61
14	$        78.50	0.3245	$        25.48
15	$        78.50	0.2995	$        23.51
16	$        78.50	0.2763	$        21.69
17	$        78.50	0.2550	$        20.02
18	$        78.50	0.2353	$        18.47
19	$        78.50	0.2171	$        17.05
20	$        78.50	0.2004	$        15.73
20	$   1,000.00	0.2004	$      200.36
Price of Bond			$      950.32

Part C:

Year	CF	PVF @11%	Disc CF
1	$      110.00	0.9009	$        99.10
2	$      110.00	0.8116	$        89.28
3	$      110.00	0.7312	$        80.43
4	$      110.00	0.6587	$        72.46
5	$      110.00	0.5935	$        65.28
6	$      110.00	0.5346	$        58.81
7	$      110.00	0.4817	$        52.98
8	$      110.00	0.4339	$        47.73
9	$      110.00	0.3909	$        43.00
10	$      110.00	0.3522	$        38.74
11	$      110.00	0.3173	$        34.90
12	$      110.00	0.2858	$        31.44
13	$      110.00	0.2575	$        28.33
14	$      110.00	0.2320	$        25.52
15	$      110.00	0.2090	$        22.99
16	$      110.00	0.1883	$        20.71
17	$      110.00	0.1696	$        18.66
18	$      110.00	0.1528	$        16.81
19	$      110.00	0.1377	$        15.14
20	$      110.00	0.1240	$        13.64
21	$      110.00	0.1117	$        12.29
22	$      110.00	0.1007	$        11.07
23	$      110.00	0.0907	$           9.98
24	$      110.00	0.0817	$           8.99
25	$      110.00	0.0736	$           8.10
25	$   1,000.00	0.0736	$        73.61
PRICE OF Bond			$   1,000.00