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Complete the following table (use $1000 Par value, 10 years, & semi-annual coupon payments): Bond Coupon...

Complete the following table (use $1000 Par value, 10 years, & semi-annual coupon payments):
Bond Coupon Rate Yield to Maturity Coupon Payment Bond Value Discount or Premium
A 5.0% 4.5%
B 6.0% 9.0%
C 4.0% 8.0%
D 9.0% 8.0%
E 12.0% 15.0%

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Expert Solution

Bond A:

Face Value = $1,000

Annual Coupon Rate = 5.00%
Semiannual Coupon Rate = 2.50%

Coupon Payment = 2.50% * $1,000
Coupon Payment = $25

Annual YTM = 4.50%
Semiannual YTM = 2.25%

Time to Maturity = 10 years
Semiannual Period to Maturity = 20

Bond Value = $25 * PVIFA(2.25%, 20) + $1,000 * PVIF(2.25%, 20)
Bond Value = $25 * (1 - (1/1.0225)^20) / 0.0225 + $1,000 / 1.0225^20
Bond Value = $1,039.91

Premium = $1,039.91 - $1,000
Premium = $39.91

Bond B:

Face Value = $1,000

Annual Coupon Rate = 6.00%
Semiannual Coupon Rate = 3.00%

Coupon Payment = 3.00% * $1,000
Coupon Payment = $30

Annual YTM = 9.00%
Semiannual YTM = 4.50%

Time to Maturity = 10 years
Semiannual Period to Maturity = 20

Bond Value = $30 * PVIFA(4.50%, 20) + $1,000 * PVIF(4.50%, 20)
Bond Value = $30 * (1 - (1/1.045)^20) / 0.045 + $1,000 / 1.045^20
Bond Value = $804.88

Discount = $1,000 - $804.88
Premium = $195.12

Bond C:

Face Value = $1,000

Annual Coupon Rate = 4.00%
Semiannual Coupon Rate = 2.00%

Coupon Payment = 2.00% * $1,000
Coupon Payment = $20

Annual YTM = 8.00%
Semiannual YTM = 4.00%

Time to Maturity = 10 years
Semiannual Period to Maturity = 20

Bond Value = $20 * PVIFA(4.00%, 20) + $1,000 * PVIF(4.00%, 20)
Bond Value = $20 * (1 - (1/1.04)^20) / 0.04 + $1,000 / 1.04^20
Bond Value = $728.19

Discount = $1,000 - $728.19
Discount = $271.81

Bond D:

Face Value = $1,000

Annual Coupon Rate = 9.00%
Semiannual Coupon Rate = 4.50%

Coupon Payment = 4.50% * $1,000
Coupon Payment = $45

Annual YTM = 8.00%
Semiannual YTM = 4.00%

Time to Maturity = 10 years
Semiannual Period to Maturity = 20

Bond Value = $45 * PVIFA(4.00%, 20) + $1,000 * PVIF(4.00%, 20)
Bond Value = $45 * (1 - (1/1.04)^20) / 0.04 + $1,000 / 1.04^20
Bond Value = $1,067.95

Premium = $1,067.95 - $1,000
Premium = $67.95

Bond E:

Face Value = $1,000

Annual Coupon Rate = 12.00%
Semiannual Coupon Rate = 6.00%

Coupon Payment = 6.00% * $1,000
Coupon Payment = $60

Annual YTM = 15.00%
Semiannual YTM = 7.50%

Time to Maturity = 10 years
Semiannual Period to Maturity = 20

Bond Value = $60 * PVIFA(7.50%, 20) + $1,000 * PVIF(7.50%, 20)
Bond Value = $60 * (1 - (1/1.075)^20) / 0.075 + $1,000 / 1.075^20
Bond Value = $847.08

Discount = $1,000 - $847.08
Discount = $152.92

ekkarill92 answered 1 year ago
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