Question

A semi-annual coupon bond has a 6 percent coupon rate, a $1,000 face value, a current value of $1,036.09, and 3 years until the first call date. What is the call price if the yield to call is 6.5 percent?

A STRIPS has a yield to maturity of 6.2 percent, a par value of $25,000, and a time to maturity of 10 years. What is the price

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

ДА В 1 $1,000.00 6% 2 1) Face value of Bond Coupon rate Coupon frequency Current price Years until Call Yield to Call $1,036.09 6.50% Call Price $1,060.00 11 12 $25,000.00 14 13 2) Par value of STRIPS Years until maturity Yield to maturity 101 6.20% Price of STRIPS $13,699.19

Cell reference -

B A 1 21) 1000 0.06 Face value of Bond Coupon rate Coupon frequency Current price Years until Call Yield to Call 1036.09 0.065 000 Call Price =FV(C7/2,C6*2,C3/2*C2,-C5,0) 10 11 25000 12 13 2) 14 15 16 17 Par value of STRIPS Years until maturity Yield to maturity 10 0.062 Price of STRIPS =C13/(1+C15)^C14 18 19 20

Hope it will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.