Question

In: Finance

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

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.)

Solutions

Expert Solution

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

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