BHC Corporation just issued a $1,000 par value bond with a 7 percent yield to maturity,...
- BHC Corporation just issued a $1,000 par value bond with a 7 percent yield to maturity, twenty years to maturity, with an 8 percent semi-annual coupon rate. 6 points
- What is the price of the BHC Corporate bond?
- If market interest rates are constant, what will the price of the BHC Corporate bond be in three years?
- If market interest rates rise to 10 percent, what will the price of the BHC Corporate bond be in three years?
Homework Answers
a]
Price of a bond is the present value of its cash flows. The cash flows are the coupon payments and the face value receivable on maturity
Price of bond is calculated using PV function in Excel :
rate = 7%/2 (Semiannual YTM of bonds = Annual YTM / 2)
nper = 20 * 2 (20 years to maturity with 2 semiannual coupon payments each year))
pmt = 1000 * 8% / 2 (semiannual coupon payment = face value * coupon rate / 2)
fv = 1000 (face value receivable on maturity)
PV is calculated to be $1,106.78
b]
Price of a bond is the present value of its cash flows. The cash flows are the coupon payments and the face value receivable on maturity
Price of bond is calculated using PV function in Excel :
rate = 7%/2 (Semiannual YTM of bonds = Annual YTM / 2)
nper = 17 * 2 (17 years to maturity with 2 semiannual coupon payments each year))
pmt = 1000 * 8% / 2 (semiannual coupon payment = face value * coupon rate / 2)
fv = 1000 (face value receivable on maturity)
PV is calculated to be $1,098.50
c]
Price of a bond is the present value of its cash flows. The cash flows are the coupon payments and the face value receivable on maturity
Price of bond is calculated using PV function in Excel :
rate = 10%/2 (Semiannual YTM of bonds = Annual YTM / 2)
nper = 17 * 2 (17 years to maturity with 2 semiannual coupon payments each year))
pmt = 1000 * 8% / 2 (semiannual coupon payment = face value * coupon rate / 2)
fv = 1000 (face value receivable on maturity)
PV is calculated to be $838.07
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BHC Corporation just issued a $1,000 par value bond with a 7
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Exhibit 12.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) XLR Corporation just issued a $1,000 par value b...
Exhibit 12.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) XLR Corporation just issued a $1,000 par value bond with a 7 percent yield to maturity, twenty years to maturity, with an 8 percent semi-annual coupon rate. 37. Refer to Exhibit 12.2. If market interest rates rise to 10 percent, what will the price of the XLR Corporate bond be in three years? a. $832.89 b. $838.07 c. $1097.63 d. $1,102.85 e. $1,191.43
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