Working:
Bond 1:
Face value = $16,000
Quarterly coupon = 16000 * 12% / 4 = $480
Sale price = $17884.50
Quarterly yield = 10% / 4 = 2.5%
To get time to maturity we will use NPER function of excel:
= NPER (rate, pmt, pv, fv, type) = NPER(2.5%, 480, -17884.50, 16000, 0) = 36
Bond 2:
Face value = $16,000
Quarterly coupon = 16000 * 4.2% / 4 = $168
Time to maturity (in quarters) = as calculated above = 36
Quarterly yield = 10% / 4 = 2.5%
Sale price = PV (rate, nper, pmt, fv, type) = PV(2.5%, 36, -168, -16000, 0) = $10,534.95
Value of P = Sale price of Bond 2 = $10,534.95
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