2. Bond Valuation: You are analyzing a bond. The bond has a $1,000 face value, matures...

2. Bond Valuation:

You are analyzing a bond. The bond has a $1,000 face value, matures in 10 years, and pays a 6.0% annual interest coupon payment. The bond pays interest semi-annually.

a. What is the amount of interest (in dollars) you can expect to receive from this bond every six months?

b. How many semiannual interest payments will you receive?

c. If the bond sells for $1,025.00, what is the bond’s current yield to maturity (YTM)? Write your inputs as periodic rates, but give the answer as an annual rarte.

PV=

FV=

PMT=

d. If market interest rates go up on the bond by one percentage point, what should you be willing to pay for it? Write your inputs as periodic rates.

PV=
FV=
PMT=
N=
I=

Solutions

Expert Solution

a). Semiannual coupon interest rate payment = (6%/2)*1000

= $30

b). Number of periods semi-annual interest payment to be received = 10*2 = 20

jeff jeffy answered 1 year ago

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