Question

2. You buy a 12%, 7-year bond with a yield to maturity of 10.5%. A. What is the price on this bond? B. One year later, the yield to maturity on the bond is 9%. What is the price of the bond at this time? C. Calculate your percentage return on this bond if you sell at this time.

How do I do this on Excel?

Answer 1

A.	Price of Bond	=-pv(rate,nper,pmt,fv)
		= $ 1,071.84
	Where,
	rate	=	Discount rate		=	10.50%
	nper	=	Time			=	7
	pmt	=	Coupon Payment	=	1000*12%	=	$     120.00
	fv	=	Face Value		=	$ 1,000.00
B.	Price of Bond	=-pv(rate,nper,pmt,fv)
		= $ 1,134.58
	Where,
	rate	=	Discount rate		=	9.00%
	nper	=	Time			=	6
	pmt	=	Coupon Payment	=	1000*12%	=	$     120.00
	fv	=	Face Value		=	$ 1,000.00
c.	Return	=rate(nper,pmt,pv,fv)
		= 17.05%
	Where,
	nper	=	Time	=	1
	pmt	=	Coupon Payment	=	$      120.00
	pv	=	Initial Price	=	$ -1,071.84
	fv	=	Price after 1 year	=	$   1,134.58