Question

25. Determine the price for each bond. Each case is independent of the others. a. A bond issue for 10,000,000 with an 8% coupon, with interest paid semiannually. The bond is for 20 years. The market rate of interest is 9% b. A bond issue for 10,000,000 with a 10% coupon paid semiannually. The bond is for 10 years. The market rate of interest is 12%. TC. A zero coupon bond issue for 10,000,000. The bond is for 15 years and the market rate of interest is 7%.

Answer 1

Hi

Let me know in case you face any issue:

Answers are highlighted in yellow: Solution: Excel Formula: PV(rate,nper,pmt, fv) Issue price, using Excel formula: Issue price of the bonds: FV (Face Value of Bond) PMT (Interest Per Period) - 4% Nper (Number of Periods) Rate PV (Bond Value) - or Issue price -10000000 -400000 40 (9%/2) 4.50% pv(4.5%,40,-400000,-10000000) 9079921 9079920.78 Excel Formula: PV(rate,nper,pmt,fv) Issue price, using Excel formula: Issue price of the bonds: FV (Face Value of Bond) PMT (Interest Per Period) - 5% Nper (Number of Periods) Rate PV (Bond Value) - or Issue price -10000000 -500000 20 6.00% 8853008 (12%/2) pv(6%,20,-500000,-10000000) b) Excel Formula: PV(rate,nper,pmt, fv) - 10000000 Issue price, using Excel formula: Issue price of the bonds: FV (Face Value of Bond) PMT (Interest Per Period) -0% Nper (Number of Periods) Rate PV (Bond Value) - or Issue price 7.00% 3624460 C pv(7%,15,-0,-10000000)