Bonds and Their Valuation
CHAPTER 4 BONDS ANND THEIR VALUATION
Bond value--semiannual payment 1. You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months. If your nominal annual required rate of return is 10 percent with semiannual compounding, how much should you be willing to pay for this bond?
N = 20 I/Y = 5 PV = -1124.62 PMT = 60 FV = 1000 Bond value--semiannual payment 2. Assume that you wish to purchase a 20-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $40. If you require a 10 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
N = 40 I/Y = 5 PV = -828.41 PMT = 40 FV = 1000
Bond value--semiannual payment 3. A bond that matures in 12 years has a 9 percent semiannual coupon (i.e., the bond pays a $45 coupon every six months) and a face value of $1,000. The bond has a nominal yield to maturity of 8 percent. What is the price of the bond today?
N = 24 I/Y = 4 PV = -1076.23 PMT = 45 FV = 1000
Bond value--semiannual payment 4. A corporate bond with a $1,000 face value pays a $50 coupon every six months. The bond will mature in 10 years, and has a nominal yield to maturity of 9 percent. What is the price of the bond?
N = 20 I/Y = 4.5 PV = -1065.04 PMT = 50 FV = 1000
Yield to maturity--semiannual bond 5. A corporate bond has a face value of $1,000, and pays a $50 coupon every six months (that is, the bond has a 10 percent semiannual coupon). The bond matures in 12 years and sells at a price of $1,080. What is the bond’s nominal yield to maturity?
N = 24 I/Y = 4.45*2 = 8.90 PV = -1080 PMT = 50 FV = 1000
Chapter 7 - Page 1
Yield to maturity--semiannual bond 6. You just purchased a $1,000 par value, 9-year, 7 percent annual coupon bond that pays interest on a semiannual basis. The bond sells for $920. What is the bond’s nominal yield to maturity? N = 18 I/Y = 4.14*2 = 8.28 PV = -920 PMT = 35 FV = 1000 Current
Bond value--semiannual payment 1. You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months. If your nominal annual required rate of return is 10 percent with semiannual compounding, how much should you be willing to pay for this bond?
N = 20 I/Y = 5 PV = -1124.62 PMT = 60 FV = 1000 Bond value--semiannual payment 2. Assume that you wish to purchase a 20-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $40. If you require a 10 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
N = 40 I/Y = 5 PV = -828.41 PMT = 40 FV = 1000
Bond value--semiannual payment 3. A bond that matures in 12 years has a 9 percent semiannual coupon (i.e., the bond pays a $45 coupon every six months) and a face value of $1,000. The bond has a nominal yield to maturity of 8 percent. What is the price of the bond today?
N = 24 I/Y = 4 PV = -1076.23 PMT = 45 FV = 1000
Bond value--semiannual payment 4. A corporate bond with a $1,000 face value pays a $50 coupon every six months. The bond will mature in 10 years, and has a nominal yield to maturity of 9 percent. What is the price of the bond?
N = 20 I/Y = 4.5 PV = -1065.04 PMT = 50 FV = 1000
Yield to maturity--semiannual bond 5. A corporate bond has a face value of $1,000, and pays a $50 coupon every six months (that is, the bond has a 10 percent semiannual coupon). The bond matures in 12 years and sells at a price of $1,080. What is the bond’s nominal yield to maturity?
N = 24 I/Y = 4.45*2 = 8.90 PV = -1080 PMT = 50 FV = 1000
Chapter 7 - Page 1
Yield to maturity--semiannual bond 6. You just purchased a $1,000 par value, 9-year, 7 percent annual coupon bond that pays interest on a semiannual basis. The bond sells for $920. What is the bond’s nominal yield to maturity? N = 18 I/Y = 4.14*2 = 8.28 PV = -920 PMT = 35 FV = 1000 Current