Question

. BIU Alignment Font mat Painter Sard - XE Problem 6-19 Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment? Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section S Maturity (years) Face value Coupon rate Yield to maturity 10 1,000 796 70 Maturity (years) Today's coupon payment PV of remaining coupon payments after today Bond price A positive values expected 11 Requirements 1 in cel Dii, by using cell references, calculate the number of periods left on the bond (1 pt.). 2 in cell D12, by using cell references, calculate today's coupon payment of the bond (1 pt.). 3 Ince D13, by using the PV function calculate the present value of the remaining coupon payments after today (1 p.) Note: The output of the expression or function you typed in this cell is expected as a positive number Ince D14 by using the cell references, calculate the price of the bond (1 pt.). Note: The output of the expression or function you typed in this cell is expected as a positive number

Answer 1

Price At time of issue (1ooo x 7%) ( - (L+62)"') +1000 = 1073.60081 • Paine imediately before 14 Coupon 1073-60082 x (1+672) - 1138- 01692 Price numediately after = 1138.01692 70 - 1068.01 692

time to next coupon	1 year	2 year	3 year	4 year	5 year	6 year	7 year	8 year	9 year
Coupon period	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8	Year 9	Year 10
Interest	70	70	70	70	70	70	70	70	70
PVF at 6% YTM	0.943	0.890	0.840	0.792	0.747	0.705	0.665	0.627	0.592
PV	66.03773585	62.2997508	58.77334981	55.44655643	52.3080721	49.34723783	46.55399795	43.91886599	41.43289245
PV of remaining coupon at end of year 1	476.1184592