Homework Answers
2-value of bond = (coupon payment*PVAF at 2.99%)+(face value*PVF at 2.99 %)
1150 = (coupon payment*12.5707)+(1000*.6241)
1150 = coupon payment*12.5707)+624.1
Semiannual coupon payment = 525.9/12.5707 = 41.8353
annual coupon payment = 41.8353*2 = 83.6707
Current Yield = coupon payment/market price = 83.6707/1150 = 7.28%
PVAF at 5.98% for 16 semiannual period =1-(1+r)^-n/ r = 1-(1.0299)^-16 /2.99% =12.5707
PVF at 2.99% at 16th semiannual period =1/(1.0299)^16 =.6241
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| Option is 3 | |||
| Price of 5 year bond =Using present value function in MS excel | pv(rate,nper,pmt,fv,type) rate = 3.7% pmt =27.5 nper = 10 fv =1000 type = 0 | PV(3.7%,9,-27.5,-1000,0) | $935.24 |
| change in price of 5 year bond | (current price-purchase price)/purchase price | (935.24-1000)/1000 | -6.48% |
| Price of 10 year bond =Using present value function in MS excel | pv(rate,nper,pmt,fv,type) rate = 3.7% pmt =27.5 nper = 20 fv =1000 type = 0 | PV(3.7%,20,-27.5,-1000,0) | $876.75 |
| change in price of 5 year bond | (current price-purchase price)/purchase price | (876.75-1000)/1000 | -12.33% |
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