Calculate the value of a bond that matures in 18 years and has a $1,000 par...

Calculate the value of a bond that matures in 18 years and has a $1,000 par value. The annual coupon interest rate is 13 percent and the market's required yield to maturity on a comparable-risk bond is 15 percent.

Expert Solution

Statemnet showing Price or Intrinsic Value
Particulars	Time	PVf @15%	Amount	PV
Cash Flows (Interest)	1.00	0.8696	130.00	113.04
Cash Flows (Interest)	2.00	0.7561	130.00	98.30
Cash Flows (Interest)	3.00	0.6575	130.00	85.48
Cash Flows (Interest)	4.00	0.5718	130.00	74.33
Cash Flows (Interest)	5.00	0.4972	130.00	64.63
Cash Flows (Interest)	6.00	0.4323	130.00	56.20
Cash Flows (Interest)	7.00	0.3759	130.00	48.87
Cash Flows (Interest)	8.00	0.3269	130.00	42.50
Cash Flows (Interest)	9.00	0.2843	130.00	36.95
Cash Flows (Interest)	10.00	0.2472	130.00	32.13
Cash Flows (Interest)	11.00	0.2149	130.00	27.94
Cash Flows (Interest)	12.00	0.1869	130.00	24.30
Cash Flows (Interest)	13.00	0.1625	130.00	21.13
Cash Flows (Interest)	14.00	0.1413	130.00	18.37
Cash Flows (Interest)	15.00	0.1229	130.00	15.98
Cash Flows (Interest)	16.00	0.1069	130.00	13.89
Cash Flows (Interest)	17.00	0.0929	130.00	12.08
Cash Flows (Interest)	18.00	0.0808	130.00	10.50
Cash flows (Maturity Amount)	18.00	0.0808	1,000.00	80.80
Intrinsic Value of Bond or Current Bond Price				877.44

Value of bond is $877.44

jeff jeffy answered 1 year ago

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