Solution: | |||
Bond price =$1,152.47 | |||
Working Notes: | |||
Bond Price = Periodic Coupon Payments x Cumulative PVF @ periodic YTM (for t= to t=n) + PVF for t=n @ periodic YTM x Face value of Bond | |||
Coupon Rate = 10% | |||
Annual coupon = Face value of bond x Coupon Rate = 1,000 x 10% = $100 | |||
Semi annual coupon = Annual coupon / 2 = $100/2=$50 | |||
YTM= 8% p.a (annual) = required rate of return | |||
Semi annual YTM= 8%/2 = 4% | |||
n= no.of coupon = No. Of years x no. Of coupon in a year | |||
= 12 x 2 = 24 | |||
Bond Price = Periodic Coupon Payments x Cumulative PVF @ periodic YTM (for t= to t=n) + PVF for t=n @ periodic YTM x Face value of Bond | |||
= $50 x Cumulative PVF @ 4% for 1 to 24th + PVF @ 4% for 24th period x 1,000 | |||
= 50 x 15.24696314 + 1000 x 0.390121474 | |||
=$1152.469631 | |||
=1152.47 | |||
Cumulative PVF @ 4 % for 1 to 24th is calculated = (1 - (1/(1 + 0.04)^24) ) /0.04 = 15.24696314 | |||
PVF @ 4% for 24th period is calculated by = 1/(1+i)^n = 1/(1.04)^24 =0.390121474 | |||
Please feel free to ask if anything about above solution in comment section of the question. |
Coupon = 10% per year, paid Semi-annually matwity = 12 Years * Face value = $1000...
Corp-X issued corporate bonds one year ago at par with a face value of $1000, an annual coupon rate of 6%(paid semi annually), and a 20 years to maturity. At the moment, bonds of equivalent risk and maturity to these Corp-X bonds are being issued at par with a coupon rate of 5.5% per year(paid semi annually) 1. At the time that Corp-X bonds were issued, what was the Yield to Maturity of the bonds? And What is the current...
A corporate bond's face value is $1000 and it matures in 12 years. Coupons are paid semi-annually. What is the bond's yield to maturity, if its coupon rate is 4.8% and it is currently trading for $1014.5? [Provide your answer in percent, with two decimals, omitting the % sign.]
Suppose that a 15-year $1000-face value government (risk-free) coupon bond with 8% coupon payments (paid annually) is currently selling at par. ABC Company’s bonds are rated AA, and the credit spread on these bonds is 3%. At what price would you be willing to purchase a 15-year ABC Company bond with a $1000-face value if it offers 8% coupon payments (paid annually)? Show your calculations and explain your result.
Suppose that a 15-year $1000-face value government (risk-free) coupon bond with 8% coupon payments (paid annually) is currently selling at par. ABC Company’s bonds are rated AA, and the credit spread on these bonds is 3%. At what price would you be willing to purchase a 15-year ABC Company bond with a $1000-face value if it offers 8% coupon payments (paid annually)? Show your calculations and explain your result.
(4 points) Consider a 2-year mortgage loan that is paid back semi-annually. The semi-annually compounded mortgage rate is 5%. The principal is $1000. a) (1 point) Calculate the semi-annual coupon. b) (3 points) How much of the coupon is interest payment and how much is principal repayment in 0.5 year, in 1 year, in 1.5 years, and in 2 years? Also calculate the (post- coupon) notional value of the outstanding principle for these four dates. (4 points) Consider a 2-year...
1. If you buy a semi-annually compounded 5-year corporate coupon bond with a face value of $1000, coupon rate of 4%, and yield to maturity of 6%, then you know that a)the fair price of the bond is less than $1000. b)the coupon amount is $30. c)both a) and b) are correct. d)neither a) nor b) is correct. 2. Assuming 365 days in a year, if the annual interest rate is 10%, what is the present value of a $100...
2. You own a 20-year, $1000 face value bond paying 8% coupon annually. What should be the market price of the bond so that its Yield to Maturity is exactly 10%? You also own a 30-year, $1000 face value bond paying 9% coupon annually. If your required rate of return is 9%, what should be the value of the bond?
What is the price of a 10-year $1,000 face value bond with a coupon rate of 8.0% that pays semi-annually, if the yield is 10%? Type your answer
A corporate bond's face value is $1000 and it matures in 8 years. Coupons are paid semi-annually. What is the bond's yield to maturity, if its coupon rate is 6.4% and it is currently trading for $1080.9? [Provide your answer in percent, with two decimals, omitting the % sign.]
Consider a 10 year bond with face value $1,000, pays 6% coupon semi-annually and has a yield-to-maturity of 7%. How much would the approximate percentage change in the price of bond if interest rate in the economy decreases by 0.80% per year? (i) Describe and interpret the assumptions related to the problem. (ii) Apply the appropriate mathematical model to solve the problem. (iii) Calculate the correct solution to the problem