Homework Answers
Answer- P 11.4)
Given
FV = $ 1000
N =17 years
Coupon payment = PMT = $ 90
YTM = 9.1 %
PV = $ 991.51
The price of the bond is $ 991.51
Answer- P 11.2)
Bond 1
FV = $ 1000
N =15
Coupon = 5% = 0.05 x 100 = $ 50
PMT = $ 50
YTM = 10 %
PV = $ 619.7
The price of the bond = $ 619.7
Bond 2
FV = $ 1000
N = 25
Coupon = 7 % = 0.07 x 100 = $ 70
PMT = $ 70
YTM = 6.5 %
PV = $ 1060.98
The price of the bond = $ 1060.98
The price with lower price is Bond 1 the one with 5 %, 15-year bond with 10 % YTM = $ 619.7
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