Bonds price - Finance Bond Valuation by ClassOf1

VIEWS: 43 PAGES: 1

More Info
									              Sub: Finance                                                                            Topic: Bond Valuation



              Question:
              Computation of price of the bond using given information.

         ClassOf1 provides expert guidance to College, Graduate, and High school students on homework and assignment problems in
                       Math, Sciences, Finance, Marketing, Statistics, Economics, Engineering, and many other subjects.



              Calculate the price of the following bonds, where F is the face value, c is the coupon rate, N is
              the number of years to maturity, and i is the interest rate (or discount rate, or yield):

                   a. F = $100, c = 10%, N = 2, i = 8%

                   b. F = $10,000, c = 6%, N = 3, i = 9%

                   c. F = $1,000, c = 0%, N = 10, i = 6%

                   d. F = $10,000, c = 7%, N → ∞ (bond never matures), i = 6%



              Solution:
                Using excel formula:

                a. Price of the bond                    $103.57
                b.Price of the bond                    $9,240.61
                c.Price of the Bond                     $558.39
                d.Price of the bond= C/r               11666.67
                Coupon Payment (c )                         700
                Interest rate( r)                            6%


                                                          ** End of the Solution **


         ClassOf1 provides expert guidance to College, Graduate, and High school students on homework and assignment problems in
                       Math, Sciences, Finance, Marketing, Statistics, Economics, Engineering, and many other subjects.

                                                                www.classof1.com


*The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for submitting the same in
                                                      lieu of your academic submissions for grades.
missions for grades.

								
To top