Question

Missing information on a bond. Your broker faxed to you the following information about two monthly coupon bonds that you are considering as a potential investment. Unfortunately, your fax machine is blurring some of the items, and all you can read from the fax on the two different bonds is the following: E . Fill in the missing data from the information that the broker sent. i Data Table (Click on the following icon in order to copy its contents into a spreadsheet.) AOL Coupon Bond a $5,000 Features Face value (Par). Coupon rate Yield to maturity. Years to maturity. IBM Coupon Bond $1,000 12.5% 10.5% S25 5.5% 1 5 $6,784.80 Price Print Done

Answer 1

IBM Coupon Bond

Value Of Bond =Coupon( PVAF @ r%, n years) + Maturity Value(PVF@ r%, 25 year)

Where PVAF is Present Value Annuity Factor

and PVF is the Present value factor

Value of Bond = 125 ( PVAF @ 10.5%, 25 yrs) + 1000(PVF@ 10.5% 25th year)

=125(31.1215) + 1000(0.0824)

= $ 3972.59

AOL Coupon Bond

Value Of Bond =Coupon( PVAF @ r%, n years) + Maturity Value(PVF@ r%, 15 year)

Where PVAF is Present Value Annuity Factor

and PVF is the Present value factor

Value of Bond = C ( PVAF @ 5.5%, 15 yrs) + 5000(PVF@ 5.5% 15th year)

6784.80 =C(10.04) + 5000(0.4479)

C   = $ 454.53

Coupon Rate = Coupon/ Face Value = 454.53/5000 = 9.09%

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