Course: Theory of Interest (Actuarial Science) Chapter: Bonds Problem: You are given two n-year par value...

Course: Theory of Interest (Actuarial Science)

Chapter: Bonds

Problem:

You are given two n-year par value (C=F=1,000) bonds. Bond X has 14% semiannual coupons and price of $1,407.70 to yield i, compounded semiannually. Bond Y has the same yield rate, semiannual coupons of 12% and a price of $1,271.80. Find the price of bond X to yield i - 1% (i - .01).

Answer: $1,497.42

Expert Solution

First of all, there are 2 missing variables in the question, Yield and Time period for both bonds

The thing is both the variables are same for both the bond. So we can use hit and trial method is excel to see at what time and yield will be applicable for these bonds

We can use RATE() function in excel to find the rate

So Time = 10 years

Yield = 8% annual

Now we can use PV () function in excel to find the price of the bond at new yield i.e 8 -1 = 7%

PLEASE RATE THUMBS UP IF YOU LIKE THE ANSWER

jeff jeffy answered 1 year ago

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