Question

bond x is promary making semi annual paymentscoupan rate 7.4% YTM 6.8% has 13 years of maturity. bond y is discount bond making semiannual payments coupan rate 6.8% YTM 7.4% 13 years maturity par balue 1000 what is price today one year three year eight years 12 years 13 years from now

Answer 1

We will use excel to solve this problem.

Bond X	Present Value	1 year from now	3 year from now	8 year from now	12 year from now	13 year from now	Formula
Face Value	1,000	1,000	1,000	1,000	1,000	1,000
Coupon rate	7.4%	7.4%	7.4%	7.4%	7.4%	7.4%
Market Interest rate	6.8%	6.8%	6.8%	6.8%	6.8%	6.8%
Years to maturity	13	12	10	5	1	-	remaining years to maturity of bonds)
Payments per year	2	2	2	2	2	2
Value of Bond	1,051.24	1,048.69	1,043.03	1,025.08	1,005.71	1,000.00	(-PV(Market interest rate/payments per year, years to maturity *payments per year, coupon rate/payments per year,Face Value)
Bond Y	Present Value	1 year from now	3 year from now	8 year from now	12 year from now	13 year from now
Face Value	1,000	1,000	1,000	1,000	1,000	1,000
Coupon rate	6.8%	6.8%	6.8%	6.8%	6.8%	6.8%
Market Interest rate	7.4%	7.4%	7.4%	7.4%	7.4%	7.4%
Years to maturity	13	12	10	5	1	-
Payments per year	2	2	2	2	2	2
Value of Bond	950.45	952.82	958.12	975.30	994.32	1,000.00	(-PV(Market interest rate/payments per year, years to maturity *payments per year, coupon rate/payments per year,Face Value)

This can also be solved using traditional method, formula and example is shown below.

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