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ID: 2579783 • Letter: C
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courses.aplia.com Home Grades Personalized Reviews DiscussionCourse Materials Bonds and Their Valuation Graded Assignment | Read Chapter 7 | Back to Assignment Due Saturday 12.02.17 at 11:15 PM Attempts: Average: 14 4. Valuing semiannual coupon bonds A Aa Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles, whereas the amount of cash flow decreases by half. Using the values of cash flows and number of periods, the valuation model is adjusted accordingly Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with three years to maturity (YTM) has a coupon rate of 6%. The yield to maturity of the bond is 8.80%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note: O $927,556.21 O $584,360.41 O $788,422.78 O $1,113,067.45 Based on your calculations and understanding of semiannual coupon bonds, complete the following statement: The T-note described in this problem is selling at a discount premium All righes resen Save & 013 Cenge agecetoed All righes reserved Continue without saving Copyright Notices · Terms of Use Privacy Notice · Security Notice AccessibilityExplanation / Answer
Years
cash flow
cash flow/(1+r)^n r= 8.8/2 =4.4
1
30000
28735.63
2
30000
27524.55
3
30000
26364.51
4
30000
25253.37
5
30000
24189.05
6
1030000
795489.1
value of bond
sum of present value of cash flow
927556.2
Discount because par value is more than issued price
Years
cash flow
cash flow/(1+r)^n r= 8.8/2 =4.4
1
30000
28735.63
2
30000
27524.55
3
30000
26364.51
4
30000
25253.37
5
30000
24189.05
6
1030000
795489.1
value of bond
sum of present value of cash flow
927556.2
Discount because par value is more than issued price
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