Question

BA Corp is issuing a 10-year bond with a coupon rate of 7.17 percent. The interest rate for similar bonds is currently 7.22 percent. Assuming annual payments, what is the value of the bond? (Round answer to 2 decimal places, e.g. 15.25.)

Pierre Dupont just received a cash gift from his grandfather. He plans to invest in a five-year bond issued by Venice Corp. that pays an annual coupon of 5.55 percent. If the current market rate is 8.24 percent, what is the maximum amount Pierre should be willing to pay for this bond? (Round answer to 2 decimal places, e.g. 15.25.)

Knight, Inc., has issued a three-year bond that pays a coupon of 6.84 percent. Coupon payments are made semiannually. Given the market rate of interest of 4.97 percent, what is the market value of the bond? (Round answer to 2 decimal places, e.g. 15.25.)

Ruth Hornsby is looking to invest in a three-year bond that makes semiannual coupon payments at a rate of 7.41 percent. If these bonds have a market price of $917.83, what yield to maturity and effective annual yield can she expect to earn? (Round answer to 2 decimal places, e.g. 15.25%.)

Rudy Sandberg wants to invest in four-year bonds that are currently priced at $768. These bonds have a coupon rate of 4.62 percent and make semiannual coupon payments. What is the current market yield on this bond? (Round answer to 2 decimal places, e.g. 15.25%.)

Answer 1

Hi, As per the HOMEWORKLIB RULES, in case of multiple questions, I need to solve the first question.

The price of the bond is computed as shown below:

Bonds Price = Coupon payment x [ [ (1 - 1 / (1 + r)ⁿ ] / r ] + Par value / (1 + r)ⁿ

= $ 71.7 x [ [ (1 - 1 / (1 + 0.0722)¹⁰ ] / 0.0722 ] + $ 1,000 / 1.0722¹⁰

= $ 71.7 x 6.95270802 + $ 498.014481

= $ 996.52 Approximately

I request you to please post remaining questions separately, since as per the guidelines in case of multiple questions, I need to solve the first question.

Feel free to ask in case of any query relating to this question