Question

Problem 7-16 Bond valuation You are considering a 25-year, $1,000 par value bond. Its coupon rate is 11 %, and interest is paid semiannually. If you require an "effective" annual interest rate (not a nominal rate) of 11.63 % , how much should you be willing to pay for the bond? Do not round intermediate steps. Round your answer to the nearest cent.

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

BOND - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut Dr General -11AA = = = D A Wrap Text Merge & Center U - 8. $ - % Number Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill Sort & 2 Clear Filter Editing Find & Select Font Alignment Cells Calibri E Copy Paste Format Painter B I Clipboard AX269 AS 262 for ΑΙ AT AU AV AW AX AY AZ 263 EFFECTIVE ANNUAL RATE NOMINAL ANNUAL RATE YTM= 11.63% 11.31% [=NOMINAL(AV263,2)] 11.31% price of semi annual bond 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 HEM Rea PRICE OF THE BOND COUPON RATE PAR VALUE YEARS COUPON($) NO OF PERIODS YTM SEMI ANNUAL YTM 11.00% 1000 25 55.00 (SEMI ANNUAL] 50 11.31% 5.655% ANSWER WILLING TO PAY 974.33 (=PV(AV277,AV275,-AV274,-AV272)] Sheet2 AFN BANKING NOTE 51 53 CLEAN PRICE s10 BIDDING, UNDERWRITING EUAC AW LIFELP, IP, MRP, INFLATION WARRANT refund YIELD SPOT ferences 54 55 56 0 BOU 130% 0 -_ 0 ELEB * ENG 31-10-2019

Answer 2

=pv( 5,815;50;55;1000) = 949.04