A coupon bond that pays interest annually has a par value of $1000, matures in 11...

Question

Question

Answer 1

Answer #1

Annual coupon=1000*7%=70

Hence intrinsic value=Annual coupon*Present value of annuity factor(3%,11)+$1000*Present value of discounting factor(3%,11)

=70*9.25262411+1000*0.722421277

=$1370.10(Approx).

NOTE:

1.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=70[1-(1.03)^-11]/0.03

=70*9.25262411

2.Present value of discounting factor=1000/1.03^11

=1000*0.722421277

Answer 2

Similar Homework Help Questions

A coupon bond that pays interest annually has a par value of $1000, matures in 11...

A coupon bond that pays interest annually has a par value of $1000, matures in 11 years, and has a yield to maturity of 3%. If the coupon rate is 7%, the intrinsic value of the bond today will be
A coupon bond that pays interest semiannually has a par value of $1000, matures in 9...

A coupon bond that pays interest semiannually has a par value of $1000, matures in 9 years, and has a yield to maturity of 6%. If the coupon rate is 7%, the intrinsic value of the bond today will be
A coupon bond that pays interest annually has a par value of $1,000, matures in six...

A coupon bond that pays interest annually has a par value of $1,000, matures in six years, and has a yield to maturity of 11%. The intrinsic value of the bond today will be ________ if the coupon rate is 7.5%. A) $886.28 B) $851.93 C) $1,123.01 D) $1,000.00 E) $712.99

A coupon bond that pays interest annually is selling at par value of $1000, matures in...

A coupon bond that pays interest annually is selling at par value of $1000, matures in 5 years, and has a coupon rate of 9%. The maturity rate was calculated in Excel and is 9%. How to solve the maturity rate manually, with the detailed explanations?
A $1000 par value bond has a coupon rate of 7.8%, pays interest semi-annually, matures in...

A $1000 par value bond has a coupon rate of 7.8%, pays interest semi-annually, matures in 26 years, and is priced at a 58.28 discount from par value. What is the annual yield to maturity of this bond? (Answer to the nearest one hundedth of a percent, i.e., 1.23 but do not include the % sign).
A coupon bond that pays interest of $60 annually has a par value of $1,000, matures...

A coupon bond that pays interest of $60 annually has a par value of $1,000, matures in 5 years, and is selling today at $883.31. What is the yield to maturity for this bond? a. 6% b. 7% c. 8% d. 9%

4. A coupon bond that pays interest semi-annually has a par value of $1,000, matures in...

4. A coupon bond that pays interest semi-annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The value of the bond today will be rate is 8% a. $1,075.80 b.$924.16 if the coupon c. $922.78 d. $1,077.20 e. none of the above 5. A zero-coupon bond has a yield to maturity of 9% and a par value of$1,000. Ifthe bond matu in 8 years, the bond should sell for a...
A coupon bond that pays interest of $55 annually has a par value of $1,000, matures...

A coupon bond that pays interest of $55 annually has a par value of $1,000, matures in 5 years, and is selling today at a $74.00 discount from par value. The current yield on this bond is _________.
Coupon bond that pays interest of 8% annually has a par value of 1,000 matures in...

Coupon bond that pays interest of 8% annually has a par value of 1,000 matures in 20 years and is selling today at 1,200 ( or 120% ask price). Actual yield? Suppose that the bond is callable in 3 years at 100%. Therefore, the issuer has the right to buy the bond at par value after 2 years. In this case. what's the yield to call?

16. A coupon bond which pays interest of $40 annually, has a par value of $1,000,...

16. A coupon bond which pays interest of $40 annually, has a par value of $1,000, matures in 5 years, and is selling today at a $159.71 discount from par value. The actual yield to maturity on this bond is (in APR). 1) 5% 2) 6% 3) 7% 4) 8%