What is the value of a bond that has an annual coupon of 12%, a maturity of 5 years and the market yield is currently at 8%?
What is the value of a bond that has an annual coupon of 7%, a maturity of 10 years and the market yield is currently at 8%?
What is the value of a bond that has an annual coupon of 8%, a maturity of 15 years and the market yield is currently at 8%?
What is the value of a bond that has an annual coupon of 9%, a maturity of 20 years and the market yield is currently at 8%?
What is the interest on a $1,000 zero coupon bond with a yield of 6.75% for 2 years?
What is the yield of a $1,000 zero coupon bond maturing in 3 years purchased at $834.887?
1.Value of a bond that has an annual coupon of 12%, a maturity of 5 years and the market yield is currently at 8% |
Face value(FV)= 1000 |
Annual Coupon pmt.= 1000*12%= 120 |
Market interest rate=Yield=r= 8% |
No.of years to maturity =n= 5 |
Using the formula to find the value of the bond, |
ie. PV of all its future coupon payments+PV of the Face value to be recd. At maturity --both discounted at the market yield. |
ie. Value=(Pmt.*(1-(1+r)^-n/r)+(FV/(1+r)^n) |
ie .Value=(120*(1-1.08^-5)/0.08)+(1000/1.08^5)= |
1159.71 |
2.Value of a bond that has an annual coupon of 7%, a maturity of 10 years and the market yield is currently at 8% |
Face value(FV)= 1000 |
Annual Coupon pmt.= 1000*7%= 70 |
Market interest rate=Yield=r= 8% |
No.of years to maturity =n= 10 |
Using the formula to find the value of the bond, |
ie. PV of all its future coupon payments+PV of the Face value to be recd. At maturity --both discounted at the market yield. |
ie. Value=(Pmt.*(1-(1+r)^-n/r)+(FV/(1+r)^n) |
ie .Value=(70*(1-1.08^-10)/0.08)+(1000/1.08^10)= |
932.90 |
3.Value of a bond that has an annual coupon of 8%, a maturity of 15 years and the market yield is currently at 8% |
Face value(FV)= 1000 |
Annual Coupon pmt.= 1000*8%= 80 |
Market interest rate=Yield=r= 8% |
No.of years to maturity =n= 15 |
Using the formula to find the value of the bond, |
ie. PV of all its future coupon payments+PV of the Face value to be recd. At maturity --both discounted at the market yield. |
ie. Value=(Pmt.*(1-(1+r)^-n/r)+(FV/(1+r)^n) |
ie .Value=(80*(1-1.08^-15)/0.08)+(1000/1.08^15)= |
1000 |
4.Value of a bond that has an annual coupon of 9%, a maturity of 20 years and the market yield is currently at 8% |
Face value(FV)= 1000 |
Annual Coupon pmt.= 1000*9%= 90 |
Market interest rate=Yield=r= 8% |
No.of years to maturity =n= 20 |
Using the formula to find the value of the bond, |
ie. PV of all its future coupon payments+PV of the Face value to be recd. At maturity --both discounted at the market yield. |
ie. Value=(Pmt.*(1-(1+r)^-n/r)+(FV/(1+r)^n) |
ie .Value=(90*(1-1.08^-20)/0.08)+(1000/1.08^20)= |
1098.18 |
5.Interest or PV on a $1,000 zero coupon bond with a yield of 6.75% for 2 years |
PV of Zero=FV/(1+Yield)^n |
ie.1000/(1+0.0675)^2= |
877.53 |
6.Yield of a $1,000 zero coupon bond maturing in 3 years purchased at $834.88 |
PV of Zero=FV/(1+Yield)^n |
ie.834.88=1000/(1+Yield)^3 |
Solving the above , we get the Yield as |
6.20% |
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