In: Finance
Interest rate Required rate of return Years to maturity Value?
4% 7% 10
4% 5% 10
4% 9% 10
1.Information provided:
Par value= future value= $1,000
Time= 10 years
Yield to maturity= 7%
Coupon arte= 4%
Coupon payment= 0.04*1,000= $40
The value of the bond is calculated by computing the present value of the bond.
The below has to be entered in a financial calculator to compute the the present value of the bond:
FV= 1,000
N= 10
PMT= 40
I/Y= 7
The value obtained is 789.29.
Therefore, the value of the bond is $789.29.
2.Information provided:
Par value= future value= $1,000
Time= 10 years
Yield to maturity= 5%
Coupon arte= 4%
Coupon payment= 0.04*1,000= $40
The value of the bond is calculated by computing the present value of the bond.
The below has to be entered in a financial calculator to compute the the present value of the bond:
FV= 1,000
N= 10
PMT= 40
I/Y= 5
The value obtained is 922.78.
Therefore, the value of the bond is $922.78.
c. Information provided:
Par value= future value= $1,000
Time= 10 years
Yield to maturity= 9%
Coupon arte= 4%
Coupon payment= 0.04*1,000= $40
The value of the bond is calculated by computing the present value of the bond.
The below has to be entered in a financial calculator to compute the the present value of the bond:
FV= 1,000
N= 10
PMT= 40
I/Y= 9
The value obtained is 679.12.
Therefore, the value of the bond is $679.12.
In case of any further queries, kindly comment on the solution.