Question

In: Accounting

Complete the following table using the Excel functions like we did for homework: Hint: There is...

Complete the following table using the Excel functions like we did for homework:
Hint: There is no function for calculating coupon payments.
(Assume semi-annual coupon payments and the bond's par value is $1,000.)

Bond	Coupon Rate	Yield to Maturity	Periods to Maturity	Annual Coupon Payment	Current Bond Value	Discount or Premium
A	3.0%	5.0%	10
B	4.5%	4.0%	10
C	3.5%	6.0%	10
D	5.0%	5.0%	10
E	11.0%	10.0%	10

Expert Solution

Hey there !!

In this question we have to calculate the following using excel functions :

1. Annual Coupon Payment

2. Current Bond Value

3. Discount/ Premium

Look at the table, In the table, i have completed the missing values and you can see how a particular figure is appearing by looking at the column heading.

I have explained each and every column. Refer the content in brackets in the columns.

A	B	C	D	E	F	G	H	I	J	K
Bond	Coupon Rate	Yield to Maturity/ Discount Rate	Periods to Maturity	Par Value of Bond	Semi Annual Coupon Rate = Column B/2 ie Coupon Rate/2	nper = Period to maturity x 2 (Column D x 2)	Annual Coupon Payment = B X E	Semi Annual coupon Payment = F x E	Current Bond Value Using PV Formula	Discount or Premium =E-J
A	3%	5%	10	1000	1.50%	20	30	15	? 844	? -156
B	5%	4%	10	1000	2.25%	20	45	22.5	? 1,041	? 41
C	4%	6%	10	1000	1.75%	20	35	17.5	? 814	? -186
D	5%	5%	10	1000	2.50%	20	50	25	? 1,000	? 0
E	11%	10%	10	1000	5.50%	20	110	55	? 1,062	? 62

To calculate current bond value using excel, we have used PV Formula.

Let me explain you how to use PV function in excel...

Type this in excel = - pv (rate, nper, pmt, [fv],[type])

Now, Rate to be used is= Discount Rate / 2 (since semi annual payments)

nper = Periods to maturity * 2 (since semi annual payment)

pmt = Semi annual coupon payment

[FV] = face value of bond

Put the above figures in the table as per the given formula and then you will get the current price of the bond.

Do let me know if you have any other concerns....happy to help....

All the best !!! :)

ekkarill92 answered 1 year ago

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