Question

Calculate the value of each of the bonds shown in the following​ table, all of which pay interest semiannually.

Bond	Par Value		Coupon interest rate		Years to maturity		Required stated annual return
A	​$500		8%	​	9		11%	​
B	1,000		13		20		11
C	500		15		5		16

The value of bond A, B, C is ​$?? (Round to the nearest​ cent.)

Answer 1

Bond		Value
A		$     415.65
B		$ 1,160.46
C		$     660.46
Working;
Value of bond is the present value of cash flows from bond.
Present value of cash flows of Bond A				=	=-pv(rate,nper,pmt,fv)
				=	$ 415.65
Where,
rate	11%/2	=	0.055
nper	9*2	=	18
pmt	500*4%	=	$          20
fv		=	$        500
Present value of cash flows of Bond B				=	=-pv(rate,nper,pmt,fv)
				=	$     1,160.46
Where,
rate	11%/2	=	0.055
nper	20*2	=	40
pmt	1000*6.5%	=	$          65
fv		=	$    1,000
Present value of cash flows of Bond C				=	=-pv(rate,nper,pmt,fv)
				=	$         660.46
Where,
rate	16%/2	=	0.055
nper	5*2	=	40
pmt	500*7.5%	=	$          38
fv		=	$        500