Question

please answer both and show work!

Compute the price of a $1,000 par value, 8 percent (semi-annual payment) coupon bond with 29 years remaining until maturity assuming that the bond's yield to maturity is 16 percent? (Round your answer to 2 decimal places and record your answer without dollar sign or commas).

Answer 1

1.
FV = 1000
PMT = 1000 * 8%/2 = 40
Nper = 29 * 2 = 58
Rate = 16%/2 = 8%

Price of bond can be calculated by using the following excel formula:
=PV(rate,nper,pmt,fv)
=PV(8%,58,-40,-1000)
= 505.76

Price = 505.76

2)
FV = 1000
Nper = 11
Rate = 12%
PMT = 1000 * 6% = 60

Current price can be calculated by using the following excel formula:
=PV(rate,nper,pmt,fv)
=PV(12%,11,-60,-1000)
= 643.74

Current price = 643.74