Question

Annual interest Calculate the value of each of the bonds shown in the following table, all of which pay interest annually.

Bond     Par value            Coupon interest rate      Years to maturity             Required return

A             $1,000                   11%                                        20                                           12%

B             1,000                     8                                              16                                           8

C             100                         9                                    8                                              7

D             500                         6                                           13                                           8

E              1,000                     7                                    10                                           5

Answer 1

value of Bond A=(1000*11%)*((1-(1+12%)^(-20))/12%)+1000/(1+12%)^20=925.31

value of Bond B=(1000*8%)*((1-(1+8%)^(-16))/8%)+1000/(1+8%)^16=1000

value of Bond C=(100*9%)*((1-(1+7%)^(-8))/7%)+100/(1+7%)^8=111.94

value of Bond D=(500*6%)*((1-(1+8%)^(-13))/8%)+500/(1+8%)^13=420.96

value of Bond E=(1000*7%)*((1-(1+5%)^(-10))/5%)+1000/(1+5%)^10=1154.43

THE ABOVE IS ANSWER..