Question

In: Accounting

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%

Solutions

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
Next > < Previous

Related Solutions

A 10-year, 10% coupon bond, semi-annual payments, $1,000 Par, is expected to make all coupon payments...
A 10-year, 10% coupon bond, semi-annual payments, $1,000 Par, is expected to make all coupon payments but to pay only 50% of par value at maturity. What is the expected yield on this bond if the bond is purchased for $975? a. 10.00% b. 6.77% c. None of the options are correct. d. 11.68% e. 6.68%
Bond prices. Price the bonds from the following table with annual coupon payments. Par Value Coupon...
Bond prices. Price the bonds from the following table with annual coupon payments. Par Value Coupon Rate Years to Maturity Yield to Maturity Price ​$1,000.00 6​% 25 10​% ​? ​$1,000.00 8​% 30 12% ​? ​$5,000.00 12​% 15 11​% ​? ​$1,000.00 7​% 5 6% ​? a. Find the price for the bond in the following​ table: ​(Round to the nearest​ cent.) Par Value Coupon Rate Years to Maturity Yield to Maturity Price ​$1,000.00 6​% 25 10​% ​$_______ b. Find the price...
a bond with a $1000 par value, 10 years to maturity, and a coupon rate of...
a bond with a $1000 par value, 10 years to maturity, and a coupon rate of 6% paid annually is selling for $1,123.42. Its yield to maturity is: a. 3.00% b. 4.44% c. 12.34% d. 10.29%
A 20 yr maturity bond with par value of $1000 makes semi-annual coupon payment at a...
A 20 yr maturity bond with par value of $1000 makes semi-annual coupon payment at a coupon rate of 8%. What is the effective annual yield if the bond price is $950? The answer is 8.7% Please show work, USING THE BA CALCULATOR. Thank you.
A bond pays a 5% coupon and makes semi-annual payments. The bond has 10 years to...
A bond pays a 5% coupon and makes semi-annual payments. The bond has 10 years to maturity and a YTM of 6%. What is the current bond price?
Bond A: 10-year annual bond, price $1010, coupon rate 6% par $1000 bond B: 10-year semi-annual...
Bond A: 10-year annual bond, price $1010, coupon rate 6% par $1000 bond B: 10-year semi-annual bond, price $1010, coupon rate 6%, par $1000 Does bond A has a higher cost of debt than bond B?
An investor buys 6% semi-annual coupon paying bond with six years to maturity and $1000 par...
An investor buys 6% semi-annual coupon paying bond with six years to maturity and $1000 par value at $906.15.The bond has a YTM of 8%. For all the calculations ,keep four digits after the decimal place b)Calculate the bond's modified duration c)If the interest rate increases by 20 basis points, what is the approximate value of the bond by using modified duration? d)What is the real value of the bond after the change (using the bond pricing formula )?
The following table gives government bond prices (all have par value = $1000 and annual coupon...
The following table gives government bond prices (all have par value = $1000 and annual coupon payment): Bond Maturity (Years) Coupon (%) Yield to Maturity A 1 0.0 0.02 B 2 0.0 0.04 C 3 7.0 0.05 D 4 9.0 0.055 E 5 9.0 0.07 F 3 0.0 0.0512 G 4 0.0 0.0568 H 5 0.0 0.0624       a.     Which coupon-paying bond (bonds) is (are) mispriced by more than $1? Why?   b. Consider Bond C and Bond F, both with 3...
A 10-year maturity bond with par value of $1,000 makes annual coupon payments at a coupon...
A 10-year maturity bond with par value of $1,000 makes annual coupon payments at a coupon rate of 8%. Find the bond equivalent and effective annual yield to maturity of the bond for the following bond prices. (Round your answers to 2 decimal places.) Bond prices: 950, 1000, 1050 What are the Bond Equivalent Annual Yield to Maturity and  Effective Annual Yield to Maturity
Today, you pay $1043.76 to buy a $1000 face value 6% coupon bond (semi-annual coupon payments)...
Today, you pay $1043.76 to buy a $1000 face value 6% coupon bond (semi-annual coupon payments) bond that matures in 5 years. a.) what is the yield to maturity of this bond? b.) If you reinvest the coupon payments at 2% per year (1% per 6 monhs), what is the value of the reinvested coupons after 5 years? c.) what is yout nominal realized compound yield if hold the bond to maturity but reinvest the coupons at a rate of...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT