Question
In: Finance
1. What is the price for a $1,000 par, 10 year, 8% coupon bond with semiannual...
1. What is the price for a $1,000 par, 10 year, 8% coupon bond with semiannual payments and a 7% yield to maturity?
A. 1,105.94
B. 1,106.78
C. 1,071.06
D. 883.31
E. 907.99
2. What is the price for a $1,000 par, 20 year, 8% coupon bond with semiannual payments and a 9% yield to maturity?
A. 1,071.06
B. 1,106.78
C. 1,105.94
D. 907.99
E. 883.31
3. What is the price for a $1,000 par, 20 year, 8% coupon bond with annual payments and a 7% yield to maturity?
A. 1,071.06
B. 1,105.94
C. 883.31
D. 907.99
E. 1,106.78
4. What is the price for a $1,000 par, 5 year, 6% coupon bond with annual payments and a 9% yield to maturity?
A. 1,105.94
B. 883.31
C. 1,071.06
D. 1,106.78
E. 907.99
Thank you in advance!!!
Solutions
Expert Solution
| Q1. | ||||||
| Par value of bonds | 1000 | |||||
| Semi annul cash interest (1000*8%*6/12) | 40 | |||||
| Annuity for 20 periods at 3.50% | 14.2124 | |||||
| PVF at 20th period at 3.50% | 0.502566 | |||||
| Present value of Interest | 568.496 | |||||
| Present value of maturity | 502.566 | |||||
| Issue price | 1071.062 | |||||
| Answer is C. 1071.06 | ||||||
| Q2. | ||||||
| Par value of bonds | 1000 | |||||
| Semi annul cash interest (1000*8%*6/12) | 40 | |||||
| Annuity for 40 periods at 4.50% | 18.40158 | |||||
| PVF at 40th period at 4.50% | 0.171929 | |||||
| Present value of Interest | 736.0632 | |||||
| Present value of maturity | 171.929 | |||||
| Issue price | 907.9922 | |||||
| Answer is D. 907.99 | ||||||
| Q3. | ||||||
| Par value of bonds | 1000 | |||||
| Aannul cash interest (1000*8%) | 80 | |||||
| Annuity for 20 periods at 7% | 10.59401 | |||||
| PVF at 20th period at 7% | 0.258419 | |||||
| Present value of Interest | 847.5208 | |||||
| Present value of maturity | 258.419 | |||||
| Issue price | 1105.94 | |||||
| Answer is B. 1105.94 | ||||||
| Q4. | ||||||
| Par value of bonds | 1000 | |||||
| Aannul cash interest (1000*6%) | 60 | |||||
| Annuity for 5 periods at 9% | 3.88965 | |||||
| PVF at 5th period at 9% | 0.649931 | |||||
| Present value of Interest | 233.379 | |||||
| Present value of maturity | 649.931 | |||||
| Issue price | 883.31 | |||||
| Answer is B. 883.31 | ||||||
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