In: Finance
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.
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 |