A bond has a face value of $1,000, a coupon rate of 8%, and a yield...

A bond has a face value of $1,000, a coupon rate of 8%, and a yield to maturity of 9.5%. If the bond matures in 8 years, what is the price of the bond? (Assume coupons are paid annually.)

Expert Solution

Current Market Price of the Bond

The Market Price of the Bond is the Present Value of the Coupon Payments plus the Present Value of the face Value

Face Value of the bond = $1,000

Annual Coupon Amount = $80 [$1,000 x 8%]

Annual Yield to Maturity = 9.50%

Maturity Period = 8 Years

Therefore, the Market Price of the Bond = Present Value of the Coupon Payments + Present Value of the face Value

= $80[PVIFA 9.50%, 8 Years] + $1,000[PVIF 9.50%, 8 Years]

= [$80 x 5.43344] + [$1,000 x 0.48382]

= $434.68 + $483.82

= $918.50

“Therefore, the Price of the Bond will be $918.50”

NOTE

-The formula for calculating the Present Value Annuity Inflow Factor (PVIFA) is [{1 - (1 / (1 + r)ⁿ} / r], where “r” is the Yield to Maturity of the Bond and “n” is the number of maturity periods of the Bond.

-The formula for calculating the Present Value Inflow Factor (PVIF) is [1 / (1 + r)ⁿ], where “r” is the Yield to Maturity of the Bond and “n” is the number of maturity periods of the Bond.

jeff jeffy answered 1 year ago

An 11-year, $1,000 face value bond has an annual coupon rate of 8% and its yield...

An 11-year, $1,000 face value bond has an annual coupon rate of 8% and its yield to maturity is 7.5%. The bond can be called 3 years from now at a price of $1,060. What is the bond’s nominal yield to call?

An annual bond has a face value of $1,000, a coupon rate of 7.4%, a yield...

An annual bond has a face value of $1,000, a coupon rate of 7.4%, a yield to maturity of 6.2% and has 12 years remaining to maturity. What is the price of the bond?

A bond has a face value of $1,000, coupon rate of 8%, and matures in 6...

A bond has a face value of $1,000, coupon rate of 8%, and matures in 6 years. Imagine that the market interest rate is 6%, but immediately after you buy the bond the rate drops to 5%. What is the immediate effect on the bond price? Hint: the effect is the price of the bond after the change minus the price of the bond before the change.

A bond has $1,000 face value, coupon rate of 3.5%, and yield to maturity (YTM) of...

A bond has $1,000 face value, coupon rate of 3.5%, and yield to maturity (YTM) of 3.7%. It will mature in 17 years and coupons are paid annually. What is this bond’s current yield?

A bond has a face value of $1,000, an annual coupon rate of 5 percent, yield...

A bond has a face value of $1,000, an annual coupon rate of 5 percent, yield to maturity of 10 percent, and 10 years to maturity Calculate the bond's duration.

Current yield and yield to maturity An annual coupon bond has a $1,000 face value, coupon...

Current yield and yield to maturity An annual coupon bond has a $1,000 face value, coupon rate of 5%, will mature in 10 years, and currently sells for $810.34. a. What is the yield to maturity of the bond? b. What is the current yield of the bond? c. Why does the current yield differ from the yield to maturity? d. One year later, the market rates have increased to 8%. Assume that you have just received a coupon payment...

A bond has the following characteristics: a. Face Value of $1,000 b. Coupon rate of 8%...

A bond has the following characteristics: a. Face Value of $1,000 b. Coupon rate of 8% c. Pays interest annually d. Is a 20-year bond If similar bonds are priced at 9%, what should be the issue price for the bond? Use the below table as your guide, plus the attached TVM tables. Cash Flow Title Cah Flow Amount Factor Present Value Issue Price: If issued, will the bond be issued at par, at a discount, or at a premium.

An 8% semiannual coupon bond matures in 4 years. The bond has a face value of $1,000 and a current yield of 8.2287%.

An 8% semiannual coupon bond matures in 4 years. The bond has a face value of $1,000 and a current yield of 8.2287%. What are the bond's price and YTM? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1) Do not round intermediate calculations. Round your answer for the bond's price to the nearest cent and for YTM to two decimal places.

A 3-year, semi-annual bond has an 8% coupon rate and a face value of $1,000. If...

A 3-year, semi-annual bond has an 8% coupon rate and a face value of $1,000. If the yield to maturity on the bond is 10%, what is the price of the bond?

Consider a coupon bond that has a face value of $1,000, a coupon rate of 4%,...

Consider a coupon bond that has a face value of $1,000, a coupon rate of 4%, and five years to maturity. What is the price of the bond if the yield to maturity on similar bonds is 6%? What should its price be the following year if the yield to maturity on similar bonds falls to 5%? Would this change in yields be a good thing or not if you purchased the bond one year earlier at the price you...

Question