Homework Answers
a]
Price of a bond is the present value of its cash flows. The cash flows are the coupon payments and the face value receivable on maturity
Price of bond is calculated using PV function in Excel :
rate = 4.3% (YTM of bond)
nper = 5 (Years remaining until maturity with 1 coupon payment each year)
pmt = 1000 * 10% (annual coupon payment = face value * coupon rate)
fv = 1000 (face value receivable on maturity)
PV is calculated to be $1,251.63
b]
Price of a bond is the present value of its cash flows. The cash flows are the coupon payments and the face value receivable on maturity
Price of bond is calculated using PV function in Excel :
rate = 5.3% (YTM of bond)
nper = 5 (Years remaining until maturity with 1 coupon payment each year)
pmt = 1000 * 10% (annual coupon payment = face value * coupon rate)
fv = 1000 (face value receivable on maturity)
PV is calculated to be $1,201.81
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