Question

What must be the price of a $ 1,000 bond with a 5.6​% coupon​ rate, annual​ coupons, and 15 years to maturity if YTM is 8.1 % ​APR?

A. $ 787.31

B. $ 1,102.24

C. $ 944.78

D. $ 629.85

Answer 1

Solution :

The price of a $ 1,000 bond with a 5.6​% coupon​rate, annual​ coupons, and 15 years to maturity if YTM is 8.1 %​ APR is = $ 787.31

The solution is option A. $ 787.31

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

29.10.2019 Microsoft Excel FILE НOМE INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW A. В C D Е F G Statement showing Calculation of Price of bond Cash Flow 2 Discounted Cash Flow (6)= (4) (5) 0.9251 $ 0.8558 $ PVF @ 8.1% Sl.No. Year Nature of cash flow |(2) (1) (3) (5) (4) $ 3 1 Coupon Payment ($1000 5.6 %) 2 Coupon Payment 3 Coupon Payment 4 Coupon Payment 5 Coupon Payment 6 Coupon Payment 7 Coupon Payment 8 Coupon Payment 9 Coupon Payment 10 Coupon Payment 11 Coupon Payment 12 Coupon Payment 4 56.00 51.8039 5 2 56.00 47.9222 0.7916 S 44.3313 6 3 56.00 0.7323 $ 56.00 41.0096 7 4 0.6774 $ 0.6267 $ 8 5 56.00 37.9367 $ 6 56.00 35.0941 0.5797 $ 0.5363 $ $ 10 7 56.00 32.4645 $ 11 56.00 30.0319 0.4961 $ 0.4589 $ 0.4245 $ 0.3927 $ $ 12 9 56.00 27.7816 $ 10 13 56.00 25.6999 $ 14 11 56.00 23.7742 12 $ 21.9928 15 56.00 0.3633 $ $ 13 13 Coupon Payment 16 56.00 20.3448 14 Coupon Payment 15 Coupon Payment 0.3361 $ $ 14 17 56.00 18.8204 0.3109 S 15 $ 18 56.00 17.4102 $ 1,000.00 Price of the bond = SUM(G4:G19) 0.3109 $ 15 Face value 19 16 310.8956 20 17 787.3135 $ 21 Price of the bond ( when rounded off to two decimal places) 18 787.31 22 23 24 25 H