Question

Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.2 percent, a YTM of 7.2 percent, and has 17 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7.2 percent, a YTM of 9.2 percent, and also has 17 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000. a. What are the prices of these bonds today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What do you expect the prices of these bonds to be in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What do you expect the prices of these bonds to be in three years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What do you expect the prices of these bonds to be in eight years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g.,32.16.) e. What do you expect the prices of these bonds to be in 12 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) f. What do you expect the prices of these bonds to be in 17 years? (Do not round intermediate calculations.) Bond X Bond Y a. Price today b. Price in one year C. Price in three years d. Price in eight years e. Price in 12 years f. Price in 17 years

Answer 1

PMT = fv x coupon rate/2 FV = face value rate = YTM/2 NPER (number of payments) 34 price = pv -PV(rate,nper,pmt,fv) $1,194.32 $829.72 46 1000 pirce today Bond x Bond Y 3.60% 4.60% 34 36 1000 32 46 pirce in one year Bond x Bond Y 1000 1000 3.60% 4.60% $1,188.20 $834.16 32 36 28 46 1000 pirce in 3 years Bond X Bond Y 3.60% 4.60% $1,174.59 $844.32 28 36 1000 18 46 pirce in 8 years Bond X Bond Y 1000 1000 3.60% 4.60% $1,130.81 $879.36 18 36 10 46 1000 pirce in 12 years Bond X Bond Y 3.60% 4.60% $1,082.75 $921.26 10 36 1000 0 46 1000 pirce in 17 years Bond X Bond Y 3.60% 4.60% $1,000.00 $1,000.00 0 36 1000