Question

(1 point) Two 1000 dollar face value bonds are both redeemable at par, with the first having a redemption date 3 years prior to the redemption date of the second. Both are bought to yield 11.7 percent convertible semiannually. The first bond sells for 802.61 dollars and pays coupons at 8.3 precent convertible semiannually. The second bond pays coupons at 5.2 percent per half year. What is the price of the second bond?

Answer 1

First Bond Face value Price Coupon Rate Coupon Rate Semi annually Yield $1,000.00 Coupon Annual $802.61 Coupon Semi- Annual $83.00 $41.50 8.30% 4.15% 11.70% Life of bond (Years) 3.30 Second Bond Face value Coupon Rate Coupon Rate Semi annually $1,000.00 Coupon Annual $104.00 $52.00 10.40% Coupon Semi- Annual 5.20% Y ield 11.70% Life of bond (Years) (3 Years More than first bond) Period in life 12.6 6.30 Price of bond $943.17

A. C 1 First Bond Coupon Annual B2*B4 2 Face value 1000 3 Price -B2*B5 802.61 Coupon Semi- Annual 4 Coupon Rate 0.083 5 Coupon Rate Semi annually 0.0415 6 Yield 0.117 7 8 Life of bond (Years) =NPER(11.7%,41.5,-802.61,1000) 10 11 Second Bond Coupon Annual 12 Face value B12*B13 1000 13 Coupon Rate B14 2 Coupon Semi- Annual B12*B14 14 Coupon Rate Semi annually 0.052 15 Yield 0.117 16 Life of bond (Years) (3 Years 17 More than first bond) Period in life 6.3*2 6.3 18 19 Price of bond PV(5.85%,12.6,52,1000) 20