Valuing Bonds Microhard has issued a bond with the following characteristics: Par: $1,000 Time to maturity: 15 years Co...

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Valuing Bonds Microhard has issued a bond with the following characteristics: Par: $1,000 Time to maturity: 15 years Coupon rate: 7 percent Semiannual payments Calculate the price of this bond if the YTM is: a. 7 percent b. 9 percent c. 5 per

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Answer 1

Answer #1

a

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2

k=1

K =15x2

Bond Price =∑ [(7*1000/200)/(1 + 7/200)^k] + 1000/(1 + 7/200)^15x2

k=1

Bond Price = 1000

b

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2

k=1

K =15x2

Bond Price =∑ [(7*1000/200)/(1 + 9/200)^k] + 1000/(1 + 9/200)^15x2

k=1

Bond Price = 837.11

c

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2

k=1

K =15x2

Bond Price =∑ [(7*1000/200)/(1 + 5/200)^k] + 1000/(1 + 5/200)^15x2

k=1

Bond Price = 1209.3

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