Question

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Rick bought a bond when it was issued by Macroflex Corporation ago. 10 percent, matures in six years. Interest is paid every six months; the next inter- est payment is scheduled for six months from today. If the yield on similar risk investments is 14 percent, what is the current market value (price) of the bond? 14 years Bond Valuation ond's The bond, which has a $1,000 face value and a coupon rate equal to al bond. Bond Valuation e Ford Motor Company sold an issue of bonds with a 10-year maturity, mbers -3 Suppose a $1,000 par value, a 10 percent coupon rate, and semiannual interest payments Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6 percent. At what price would the bonds sell? Suppose that the interest rate remained at 6 percent for the next eight years. What would happen to the price of the Ford Motor Company bonds over time? on a. or b.

Answer 1

10-2)

A Par value (FV BlCoupon rate ClNumber of compounding periods per vear 1,000 10.00% 2 4 D AxB/C Interest per period (PMT 50 El Number of vears to maturit Number of compounding periods till maturity 12 14.00% GMarket rate of return/Required rate of return Market rate of return/Required rate of return per G/C period (RATE) 700% PV(RATE,NPER,PMT, FV)*-1 Current price of the bond 10 Current price of the bond$ 841.15 12 -PV( 796, 12,50, 1000)"-1