Question

Microhard has issued a bond with the following characteristics: Par: $1,000 Time to maturity: 12 years Coupon rate: 7 percent Semiannual payments Calculate the price of this bond if the YTM is: (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

rice of the Bond

a. 7 percent $

b. 9 percent $

c. 5 percent $

Answer 1

Price of Bond = PV of Cash flows from it.

Part A:

Period	CF	PVF @3.5%	Disc CF
1	$      35.00	0.9662	$      33.82
2	$      35.00	0.9335	$      32.67
3	$      35.00	0.9019	$      31.57
4	$      35.00	0.8714	$      30.50
5	$      35.00	0.8420	$      29.47
6	$      35.00	0.8135	$      28.47
7	$      35.00	0.7860	$      27.51
8	$      35.00	0.7594	$      26.58
9	$      35.00	0.7337	$      25.68
10	$      35.00	0.7089	$      24.81
11	$      35.00	0.6849	$      23.97
12	$      35.00	0.6618	$      23.16
13	$      35.00	0.6394	$      22.38
14	$      35.00	0.6178	$      21.62
15	$      35.00	0.5969	$      20.89
16	$      35.00	0.5767	$      20.18
17	$      35.00	0.5572	$      19.50
18	$      35.00	0.5384	$      18.84
19	$      35.00	0.5202	$      18.21
20	$      35.00	0.5026	$      17.59
21	$      35.00	0.4856	$      16.99
22	$      35.00	0.4692	$      16.42
23	$      35.00	0.4533	$      15.86
24	$      35.00	0.4380	$      15.33
24	$ 1,000.00	0.4380	$    437.96
Value of Bond			$ 1,000.00

Part B:

Period	CF	PVF @4.5%	Disc CF
1	$      35.00	0.9569	$      33.49
2	$      35.00	0.9157	$      32.05
3	$      35.00	0.8763	$      30.67
4	$      35.00	0.8386	$      29.35
5	$      35.00	0.8025	$      28.09
6	$      35.00	0.7679	$      26.88
7	$      35.00	0.7348	$      25.72
8	$      35.00	0.7032	$      24.61
9	$      35.00	0.6729	$      23.55
10	$      35.00	0.6439	$      22.54
11	$      35.00	0.6162	$      21.57
12	$      35.00	0.5897	$      20.64
13	$      35.00	0.5643	$      19.75
14	$      35.00	0.5400	$      18.90
15	$      35.00	0.5167	$      18.09
16	$      35.00	0.4945	$      17.31
17	$      35.00	0.4732	$      16.56
18	$      35.00	0.4528	$      15.85
19	$      35.00	0.4333	$      15.17
20	$      35.00	0.4146	$      14.51
21	$      35.00	0.3968	$      13.89
22	$      35.00	0.3797	$      13.29
23	$      35.00	0.3634	$      12.72
24	$      35.00	0.3477	$      12.17
24	$ 1,000.00	0.3477	$    347.70
Value of Bond			$    855.05

Part C:

Period	CF	PVF @2.5%	Disc CF
1	$      35.00	0.9756	$      34.15
2	$      35.00	0.9518	$      33.31
3	$      35.00	0.9286	$      32.50
4	$      35.00	0.9060	$      31.71
5	$      35.00	0.8839	$      30.93
6	$      35.00	0.8623	$      30.18
7	$      35.00	0.8413	$      29.44
8	$      35.00	0.8207	$      28.73
9	$      35.00	0.8007	$      28.03
10	$      35.00	0.7812	$      27.34
11	$      35.00	0.7621	$      26.68
12	$      35.00	0.7436	$      26.02
13	$      35.00	0.7254	$      25.39
14	$      35.00	0.7077	$      24.77
15	$      35.00	0.6905	$      24.17
16	$      35.00	0.6736	$      23.58
17	$      35.00	0.6572	$      23.00
18	$      35.00	0.6412	$      22.44
19	$      35.00	0.6255	$      21.89
20	$      35.00	0.6103	$      21.36
21	$      35.00	0.5954	$      20.84
22	$      35.00	0.5809	$      20.33
23	$      35.00	0.5667	$      19.83
24	$      35.00	0.5529	$      19.35
24	$ 1,000.00	0.5529	$    552.88
Value of Bond			$ 1,178.85