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You will buy a bond at 2008 with a maturity date of 31.12.2019 coupon payments are $91.25 each. Annual expected interest rate is 8%. please find the maximum value you should pay today?

You will buy a bond at 2008 with a maturity date of 31.12.2019 coupon payments are $91.25 each. Annual expected interest rate is 8%. please find the maximum value you should pay today?

 

 

Solutions

Expert Solution

Year Period Cash Flow a DF @ 8% b PV a*b
2008 1 91.25 0.9259 84.49
2009 2 91.25 0.8573 78.23
2010 3 91.25 0.7938 72.44
2011 4 91.25 0.7350 67.07
2012 5 91.25 0.6806 62.10
2013 6 91.25 0.6302 57.50
2014 7 91.25 0.5835 53.24
2015 8 91.25 0.5403 49.30
2016 9 91.25 0.5002 45.65
2017 10 91.25 0.4632 42.27
2018 11 91.25 0.4289 39.14
2019 12 1091.25 0.3971 433.35
      Total 1084.78

 

The Maximum Value one should pay = $1084.78.

The Maximum Value one should pay = $1084.78.

Junaid answered 3 years ago
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