# Bond Valuation

Topics: Bond, Bonds, Fixed income analysis Pages: 3 (694 words) Published: April 5, 2014

HWBond Valuation and Bond Yields
Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bonds. His financial planner has suggested the following bonds:

Bond A has a 7% annual coupon, matures in 12 years, and has a \$1000 face value. •Bond B has a 9% annual coupon, matures in 12 years, and has a \$1000 face value. •Bond C has an 11% annual coupon, matures in 12 years, and has a \$1000 face value.

Each bond has a yield to maturity (YTM) of 9%.

You can use the financial calculator in order to calculate the value of each bond. The value of each bond is equal to the present value (PV). So the first step is to assign the other values into the calculator. Since all the bonds are annual, (N) will be the number of years. The (I/Y) will equal to the YTM. The (PMT) will equal to the face value times the coupon rate. The (FV) will equal to the face value. After finding all the values, simply use the (CPT) (PV) to find the value of each bond. Bond ABond BBond C

N = 12PV = -856.79N = 12PV = -1000.00N = 12PV = -1143.21 I/Y = 9%I/Y = 9%I/Y = 9%
PMT = 70 (1000*7%)PMT = 90...