Question

Given four of the bond variables, determine the fifth bond variable. All Annual Coupons

(A) Given Number of Periods to Maturity is 10, Face Value is $1,000, YTM is 3.2%, and Coupon Payment is $40, determine the Bond Price.

(B). Given Number of Periods to Maturity is 8, Face Value is $1,000, YTM is 4.5%, and the Bond Price is $880.00, determine the Coupon Payment.

(C). Given Number of Periods to Maturity is 6, Face Value is $1,000, Coupon Payment is $30, and the Bond Price is $865.00, determine YTM.

(D). Given Number of Periods to Maturity is 8, YTM is 3.8%, Coupon Payment is $45, and the Bond Price is $872.00, determine Face Value.

(E). Given Face Value is $1,000, YTM 4.3%, Coupon Payment is $37, and the Bond Price is $887.00, determine the Number of Periods to Maturity.

Answer 1

A

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =10

Bond Price =∑ [(4*1000/100)/(1 + 3.2/100)^k]     +   1000/(1 + 3.2/100)^10

k=1

Bond Price = 1067.55

B

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =8

880 =∑ [(Coupon rate*1000/100)/(1 + 4.5/100)^k]     +   1000/(1 + 4.5/100)^8

k=1

Coupon rate% = 2.68

C

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =6

865 =∑ [(3*1000/100)/(1 + YTM/100)^k]     +   1000/(1 + YTM/100)^6

k=1

YTM% = 5.72

D

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =8

872 =∑ [(4.5*Par value/100)/(1 + 3.8/100)^k]     +   Par value/(1 + 3.8/100)^8

k=1

Par value = 832.45