Question

3. A fifteen-year bond with a 6% coupon rate and a face value of $1000 makes semi- annual coupon payments. Required return for bonds of equivalent risk is 8%. Calculate the market value of the bond. (10 pt.)

please use formulas with work

Answer 1

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File Home Insert Page Layout Formulas Data Review View - 2x BOND - Microsoft Excel (Product Activation Failed) Add-Ins a Define Name Trace Precedents 5 Show Formulas Use in Formula Trace Dependents Error Checking Name Manager Create from Selection Remove Arrows" Evaluate Formula Defined Names Formula Auditing Calculate Now Math More & Trig Functions Watch Window Insert AutoSum Recently Financial Logical Text Date & Lookup & Function Used - Time Reference Function Library CJ123 for Calculation Calculate Sheet Options Calculation Ta CK CL CM CN co CP Q CR CS CT cu cv 9 SEMI ANNUAL BOND RATE WILL BE DIVIDED BY 2, NO OF YEARS WILL BE MULTIPLIED BY 2 108 109 110 111 SO RATE = 8%/2 = 4%, n= 15 X 2 = 30, COUPON = 1000 X 6%/ 2 = 30 (HALF YEARLY) 112 113 present value of bond = 30 x PVIFA @4%, 30 PERIODS + 1000 x PVIF @4%, 30 PERIODS 114 present value of bond = 30 X (1/r)*(1-(1/(1+r)^n)) + 1000 *(1/(1+r)^n) present value of bond = 30 X (1/0.04)*(1-(1/(1+0.04)^30)) + 1000 *(1/(1+0.04)^30) 30 X 17.29203 + 1000 X 0.308319 ANSWER market value of bond = 827.08 115 116 117 118 119 120 121 122 123 124 125 126 H Rea Sheet2 AFN BANKING NOTE si 53 CLEAN PRICE 510 BIDDING, UNDERWRITING EUAC AW LIFELP, IP, MRP, INFLATION YIELD SPOT ferences WARRANT refund 54 55 I 56 | THE I7 130% O * 10 0 +) S E ENG 21-11-2019