Question

a)XYZ company has just issued a 30-year bond with a coupon rate of 7.50% (annual coupon payments) and a face value of $1,000. If the yield to maturity is 11%, what is the price of the bond? Round to the nearest cent.

b) Suppose a zero-coupon bond with 11 years to maturity and $1,000 face value has a yield to maturity of 6%, what the is price of the bond? $________ (Round to the nearest cent.)

Answer 1

	Face Value of Bond = $1000
	Years to maturity =30
	Yield to Maturity = 11%
	Coupon rate = 7.50%
	Coupon amount = $1000*7.50% = $75
Year	Coupon	Redemption	Total Cash flows	Discount Factor @11%	Discounted Values
1	75	0	75	0.901	67.568
2	75	0	75	0.812	60.872
3	75	0	75	0.731	54.839
4	75	0	75	0.659	49.405
5	75	0	75	0.593	44.509
6	75	0	75	0.535	40.098
7	75	0	75	0.482	36.124
8	75	0	75	0.434	32.544
9	75	0	75	0.391	29.319
10	75	0	75	0.352	26.414
11	75	0	75	0.317	23.796
12	75	0	75	0.286	21.438
13	75	0	75	0.258	19.314
14	75	0	75	0.232	17.400
15	75	0	75	0.209	15.675
16	75	0	75	0.188	14.122
17	75	0	75	0.170	12.722
18	75	0	75	0.153	11.462
19	75	0	75	0.138	10.326
20	75	0	75	0.124	9.303
21	75	0	75	0.112	8.381
22	75	0	75	0.101	7.550
23	75	0	75	0.091	6.802
24	75	0	75	0.082	6.128
25	75	0	75	0.074	5.521
26	75	0	75	0.066	4.974
27	75	0	75	0.060	4.481
28	75	0	75	0.054	4.037
29	75	0	75	0.048	3.637
30	75	1000	1075	0.044	46.959
				Price Of Bond	$695.72