br3ef03h/Problem 9.16 Problem 9.16 Wrong Check My Work 9-3 Bond Valiation 9-6 Bo

Question

br3ef03h/Problem 9.16 Problem 9.16 Wrong Check My Work 9-3 Bond Valiation 9-6 Bonds with Semiannual Coupons Problem 9-16 Bond valuation Bond x s noncalableand has 20 years to maturty, a 7% annual cupon, and a S1.000 par vale. Your requred return on Bond x s 11%; and f you buy t, you plan to hold t for 5years. You (and the market) have expectato ns that n s, years the yeld to ma trty on a l yer bond with smar n k wl be 105%, How much shouu vou be wlng to pay for Bond today? (Hnt: You wil need to know how much the bond wl be worth at the end of S years.) Round your answer to the nearest cent. $ 869 IHide Feedbael Incorrect

Explanation / Answer

First we will calculate price by end of 5 years:

N = 15 * 2 = 30

Coupon Payment = 7% * 1,000 = 70

Semi Annual Coupon PAyment = 70/ 2 = 35

YTM for 15 year bond = 10.5%

For Semi Annual Period YTM = 10.5%/2 = 5.25%

Using FInancial Calculator:

PV = 765.94

Now we will calculate value of bond at T= 0

FV = 765.94

N = 5 * 2 = 10

Coupon Payment = 7% * 1,000 = 70

Semi Annual Coupon PAyment = 70/ 2 = 35

YTM for 5 year bond = 11%

For Semi Annual Period YTM = 11%/2 = 5.5%

Using FInancial Calculator:

PV = 726.73

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.