Bond price is computed using Excel PV function, as follows.
Annual coupon = 500 x 4% x (1/2) = 10
(a) Semi-annual yield = 5%/2 = 2.5% and Number of coupon payments (Time to maturity) = 2 x 2 = 4
Case (a) | |
Annual Coupon (PMT) ($) = | -10 |
Face value (FV) ($) = | -500 |
Semi-annual yield (RATE) = | 2.50% |
Number of Periods (NPER) = | 4 |
Bond Price (PV) ($) = | 490.60 |
(b) Semi-annual yield = 3%/2 = 1.5% and Number of coupon payments (Time to maturity) = 2 x 2 = 4
Case (b) | |
Annual Coupon (PMT) ($) = | -10 |
Face value (FV) ($) = | -500 |
Semi-annual yield (RATE) = | 1.50% |
Number of Periods (NPER) = | 4 |
Bond Price (PV) ($) = | 509.64 |
(c) Semi-annual yield = 5%/2 = 2.5% and Number of coupon payments (Time to maturity) = 2 x 15 = 30
Case (c) | |
Annual Coupon (PMT) ($) = | -10 |
Face value (FV) ($) = | -500 |
Semi-annual yield (RATE) = | 2.50% |
Number of Periods (NPER) = | 30 |
Bond Price (PV) ($) = | 447.67 |
(d) Semi-annual yield = 3%/2 = 1.5% and Number of coupon payments (Time to maturity) = 2 x 15 = 30
Case (d) | |
Annual Coupon (PMT) ($) = | -10 |
Face value (FV) ($) = | -500 |
Semi-annual yield (RATE) = | 1.50% |
Number of Periods (NPER) = | 30 |
Bond Price (PV) ($) = | 560.04 |
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