Question

Problem 10-16 Bond Price Movements (L01, CFA5) Bond P is a premium bond with a coupon of 9.2 percent, a YTM of 7.95 percent, and 15 years to maturity. Bond D is a discount bond with a coupon of 9.2 percent, a YTM of 10.95 percent, and also 15 years to maturity. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 5 years? In 10 years? In 14 years? In 15 years? (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places.) Bond P Bond D 1 year 5 years 10 years 14 years 15 years

Answer 1

PMT = fv x coupon rate/2 FV = face value rate = YTM/2 NPER (number of payments) price = pv -PV(rate,nper,pmt,fv) $1,108.40 $872.48 pirce today Bond P Bond D 1000 1000 3.98% 5.48% 30 pirce in one year Bond P Bond D 1000 1000 3.98% 5.48% $1,104.44 $876.11 pirce in 5 year Bond P Bond D 1000 1000 3.98% 5.48% $1,085.13 $895.22 pirce in 10 year Bond P Bond D + 1000 1000 1000 $1,050.76 $933.97 5.48% pirce in 14 years Bond P Bond D 1000 1000 3.98% 5.48% $1,011.79 $983.84 pirce in 15 years Bond P Bond D 1000 1000 3.98% 5.48% $1,000.00 $1,000.00