Ford Motor Company issues a 5-year bond with a coupon rate of 7% and a face value of $100. The bond pays interest semiannually. What is the price of the bond if the yield to maturity is 6% compounded semiannually?
Please provide the excel formula to help with the solution.
The present value of the following bond can be calculated by inserting following vales in the string of present value function in the excel sheet :-
The arguments are :-
Future value :- $100
PMT :- $3.5 SEMIANNUAL coupons of 7%
Nper :- 10 (semmiannual in 5) years
I/Y ( rate) :- 0.03 ( 6 percent rate semmianual)
Type =o
=PV(rate, nper, pmt, [fv], [type])
Present value = $134.6428
I hope this helps.
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