Question

Bond prices. Price the bonds from the following table with semiannual coupon payments: a. Find the price for the bond in the following table: (Round to the nearest cent) Coupon Rate Year to Maturity Yield to Maturity Price Par Value $5,000.00 $ 7,49447 b. Find the price for the bond in the following table: (Round to the ne 0 Data Table Years to Maturity Yield Matur Par Value $1,000.00 Coupon Rate 10% (Click on the following icon in order to copy its contents into a spreadsheet.) Coupon Rate Years to Maturity Yield to Maturity Price Par Value $5.000.00 $1,000.00 $1,000.00 $1,000.00 10% 12% 26 5% 10% 1296 Print Done

Answer 1

1.Information provided:

Par value= future value= $1,000

Coupon rate= 11%/2= 5.50%

Coupon payment= 0.0550*1,000= $55

Time= 30 years*2= 60 semi-annual periods

Yield to maturity= 7%/2= 3.50% per semi-annual period

The price of the bond is computed by calculating the present value.

Enter the following in a financial calculator to compute the present value:

FV= 1,000

PMT= 55

N= 60

I/Y= 3.50

Press the CPT key and PV to compute the present value.

The value obtained is 1,498.89.

Therefore, the price of the bond is $1,498.89.

2.Information provided:

Par value= future value= $1,000

Coupon rate= 10%/2= 5%

Coupon payment= 0.05*1,000= $50

Time= 5 years*2= 10 semi-annual periods

Yield to maturity= 5%/2= 2.50% per semi-annual period

The price of the bond is computed by calculating the present value.

Enter the following in a financial calculator to compute the present value:

FV= 1,000

PMT= 50

N= 10

I/Y= 2.50

Press the CPT key and PV to compute the present value.

The value obtained is 1,218.8016.

Therefore, the price of the bond is $1,218.80.

3. Information provided:

Par value= future value= $1,000

Coupon rate= 12%/2= 6%

Coupon payment= 0.06*1,000= $60

Time= 25 years*2= 50 semi-annual periods

Yield to maturity= 10%/2= 5% per semi-annual period

The price of the bond is computed by calculating the present value.

Enter the following in a financial calculator to compute the present value:

FV= 1,000

PMT= 60

N= 50

I/Y= 5

Press the CPT key and PV to compute the present value.

The value obtained is 1,182.5593.

Therefore, the price of the bond is $1,182.56.

4. Information provided:

Par value= future value= $1,000

Coupon rate= 8%/2= 4%

Coupon payment= 0.04*1,000= $40

Time= 5 years*2= 10 semi-annual periods

Yield to maturity= 12%/2= 6% per semi-annual period

The price of the bond is computed by calculating the present value.

Enter the following in a financial calculator to compute the present value:

FV= 1,000

PMT= 40

N= 10

I/Y= 6

Press the CPT key and PV to compute the present value.

The value obtained is 852.7983.

Therefore, the price of the bond is $852.90.

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