Par Value Coupon Rate Years to Maturity Yield to Maturity Price $5,000.00 6% 5 12% ?...

Par Value	Coupon Rate	Years to Maturity	Yield to Maturity	Price
$5,000.00	6%	5	12%	?
$5,000.00	11%	15	8%	?
$1,000.00	10%	10	6%	?
$1,000.00	8%	5	5%	?

Find the price for the bond in the following table: (Round to the nearest cent.)

Solutions

Expert Solution

Case A:

Face Value = $5,000

Annual Coupon Rate = 6%
Annual Coupon = 6% * $5,000
Annual Coupon = $300

Time to Maturity = 5 years
Annual YTM = 12%

Price of Bond = $300 * PVIFA(12%, 5) + $5,000 * PVIF(12%, 5)
Price of Bond = $300 * (1 - (1/1.12)^5) / 0.12 + $5,000 / 1.12^5
Price of Bond = $3,918.57

Case B:

Face Value = $5,000

Annual Coupon Rate = 11%
Annual Coupon = 11% * $5,000
Annual Coupon = $550

Time to Maturity = 15 years
Annual YTM = 8%

Price of Bond = $550 * PVIFA(8%, 15) + $5,000 * PVIF(8%, 15)
Price of Bond = $550 * (1 - (1/1.08)^15) / 0.08 + $5,000 / 1.08^15
Price of Bond = $6,283.92

Case C:

Face Value = $1,000

Annual Coupon Rate = 10%
Annual Coupon = 10% * $1,000
Annual Coupon = $100

Time to Maturity = 10 years
Annual YTM = 6%

Price of Bond = $100 * PVIFA(6%, 10) + $1,000 * PVIF(6%, 10)
Price of Bond = $100 * (1 - (1/1.06)^10) / 0.06 + $1,000 / 1.06^10
Price of Bond = $1,294.40

Case D:

Face Value = $1,000

Annual Coupon Rate = 8%
Annual Coupon = 8% * $1,000
Annual Coupon = $80

Time to Maturity = 5 years
Annual YTM = 5%

Price of Bond = $80 * PVIFA(5%, 5) + $1,000 * PVIF(5%, 5)
Price of Bond = $80 * (1 - (1/1.05)^5) / 0.05 + $1,000 / 1.05^5
Price of Bond = $1,129.88

jeff jeffy answered 8 months ago

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