Question

Chapter 7 Question 1 Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 23 years to maturity, and a coupon rate of 3.8 percent paid annually. If the yield to maturity is 4.7 percent, what is the current price of the bond 1/1/2000 1/1/2023 For settlement date for the starting date of you owning the bond), since this bond is an imaginery bond with 23 years of matunity, you can simply put in For maturity date, just put in the date 23 years later if you actually purchased a bond, then you can use real dates for settlement and maturity Settlement date Maturity date Coupon rate Coupons per year Face value (% of par) Yield to maturity Par value Par values always 1000 unless otherwise specified Output area: Price INUM NUMI Once you input the values in the 4 blank cels above, Excel will calculate the bond price for you

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

B 1/1/2000 1/1/2023 3.80% Settlement date Maturity date Coupon rate Coupon per year Face valuel% of par) Yield to maturity Par value 100 4.70% 1,000.00 € Price € 875.09

Cell reference -

А в =DATE(2000,1,1) =DATE(2023,1,1) 0.038 Settlement date Maturity date Coupon rate Coupon per year Face valueſ% of par) Yield to maturity Par value 100 0.047 1000 Price =PRICE(C2,C3,C4*10,C7,C8,C5,3)

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.