Calculate the value of a bond with face value of 1000 usd paying interest of 8%...

Calculate the value of a bond with face value of 1000 usd paying interest of 8% over 5 tears and a yield of 7%

Expert Solution

Face value is same as Maturity value	1000
Coupon %	8%	or	8% of 1000 =	80
Term (years) or n	5
yield%	7%

Bond price (Bp)=

Present value of all coupon payments

+

Present value of Maturity value of the bond ie value of the bond returned after the term is over

Bp =	coupon/(1+i%)¹+	coupon/(1+i%)² +	coupon/(1+i%)³ +	coupon/(1+i%)⁴ +	coupon/(1+i%)⁵ +	Maturity value/ (1+i%)⁵
	75	70	65	61	57	713
BP=	1041

Bp can also be calculated using below formula in cases where term is very long
Bp =	Present value of annuity (coupon paid at the end of every year till 5 years)	+	Present value of Maturity value of the bond ie value of the bond returned after the term is over

Bp =	Coupon ((1-(1+i%)^-n)/i%) +	Maturity value/ (1+i%)^n
	80 ((1-(1+7%)^-5)/7%) +	1000/ (1+7%)^5
	328	713
Bp=	1041

* In case of any query please revert back. A positive feedback would be appreciable in case the soultion found is helpful

jeff jeffy answered 2 years ago

Calculate cost of debt for the following: The bond with a face value of 1000 were...

Calculate cost of debt for the following: The bond with a face value of 1000 were trading at RM 940 with 5 years to maturity ( annual coupon payment of 5%). Buying the truck means that he would incurring a cost of RM 85,000 each year for the whole feet. The company tax rate is 30%. The cost of capital is same as cost of deb. Which one is wiser equity or debt?

4. (Bond yield) A firm issues a bond today with a $1000 face value, an 8%...

4. (Bond yield) A firm issues a bond today with a $1000 face value, an 8% coupon rate, and 25-year maturity. a. An investor purchases the bond for $900, what is the YTM? b. Suppose the investor buys the bond for $1,200 instead, what is the YTM? c. Suppose the investor buys the bond for $1,000, what is the YTM? d. Suppose the bond in fact pays coupons semi-annually and has a price of $820, what is the YTM? 5....

Calculate the price of an 8% coupon, $1000 face value, 2-year bond that pays semi-annual coupons...

Calculate the price of an 8% coupon, $1000 face value, 2-year bond that pays semi-annual coupons if the appropriate annual discount rate is 12%. Suppose the annual discount rate on this bond rises to 16% after six months and you sell the bond at the end of the first year. What return did you actually make for the one year that you held this bond? Please show all work and do not use excel or a finance calculator.

A 15 year bond is issued with a face value of 5000, paying interest of 300...

A 15 year bond is issued with a face value of 5000, paying interest of 300 a year. If yields to maturity increase shortly after t bond is issued, what happens to the bond . Coupon rate ? .. price ?

Calculate the value of a $1,000-par-value bond paying quarterly interest at an annual coupon interest rate...

Calculate the value of a $1,000-par-value bond paying quarterly interest at an annual coupon interest rate of 8% and having 15 years until maturity if the required return on similar-risk bonds is currently a 16% annual rate paid quarterly.

A mortgage bond with face value of $10,000 has a bond interest rate of 8% per...

A mortgage bond with face value of $10,000 has a bond interest rate of 8% per year payable quarterly. What is the amount of the bond interest (I) or interest payment every quarter?

What is yield to maturity of $1000 face-value 8% coupon bond with a selling price of...

What is yield to maturity of $1000 face-value 8% coupon bond with a selling price of $1010 that has 1 year left to maturity? Assuming no inflation, under what conditions will this coupon bond have a negative yield (think about its selling price)? What about any coupon bond with any maturity?

9- A 11-year bond pays interest of $ 28.60semiannually, has a face value of $ 1000...

9- A 11-year bond pays interest of $ 28.60semiannually, has a face value of $ 1000 and is selling for $772.07. What are its annual coupon rate and yield to maturity? 13- Cyberdyne Systems is issuing a series of zero coupon bonds to raise $500M to fund research and development at its Skynet division. Each bond will have a face value of $1,000 and will mature in 19 years. The yield on the bond is 4.5%. What is the fair...

(Bond valuation) You own a 15-year, $1000 par value bond paying 7 percent interest annually. The...

(Bond valuation) You own a 15-year, $1000 par value bond paying 7 percent interest annually. The market price of the bond is $850, and your required rate of return is 10 percent. a. Compute the bond's expected rate of return. b. Determine the value of the bond to you, given your required rate of return. c. Should you sell the bond or continue to own it? a. What is the expected rate of return of the 15-year, $1000 par value...

A 12 year bond 1000 face value bond has an 8% annual coupon and a yield to maturity of 7%

A 12 year bond 1000 face value bond has an 8% annual coupon and a yield to maturity of 7%, what will be the price of the bond 3 years from today?

Question