Question

Consider the following bond issued by Halliburton:

-coupon rate: 3.618%, with semi-annual coupon payments

-Face value: $1,000

-Maturity date: August 1, 2023

Assume that today is August 2, 2016. Suppose, for the sake of argument, that the annual discount rate is 7.899%, with semi-annual compounding. What is the value of the bond?

Do not round at intermediate steps in your calculation. Round your answer to the nearest penny. Do NOT include a minus sign! Do not type the $ symbol.

Answer 1

The price or the value of the bond is equal to the present value of all future cash flows arriving from it. Face value is the value received at maturity and coupons are received periodically.

=PRICE function of excel can be used to get the price or value of the bond as under:

The settlement date is the date of buying the bond. Maturity date is the date of maturity of the bond. Rate is the coupon rate of the bond in annual terms, yld is the discount rate in annual terms, redemption is the face value of the bond per $100 face value, frequency is the number of coupon payments in a year and basis is optional which denotes the type of day count basis to be used.

The value of the bond is as shown above 77.32065696 per $100. here, the face value is $1000, so the value of the bond is $773.21

Thus, the answer is 773.21.

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