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1. What is the value of a bond that has a par value of 1,000,...

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Finance

1. What is the value of a bond that has a par value of 1,000, acoupon rate of 7% (semi-annually), and matures in 10 years? Assumea required return of 5.5%. $1,114.20 $1,102.18 $1,087.62$1,058.34

2. What is the yield-to-maturity of a 5.0% semi-annual couponbond with a $1,000 par value, which matures in 3 years? Assume thecurrent market price of the bond is $1,081.95.

1.08%

2.15%

2.16%

5.00%

Answer & Explanation Solved by verified expert
4.1 Ratings (498 Votes)

1

                  K = Nx2
Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =10x2
Bond Price =? [(7*1000/200)/(1 + 5.5/200)^k]     +   1000/(1 + 5.5/200)^10x2
                   k=1
Bond Price = 1114.2

2

                  K = Nx2
Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =3x2
1081.95 =? [(5*1000/200)/(1 + YTM/200)^k]     +   1000/(1 + YTM/200)^3x2
                   k=1
YTM% = 2.16

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Transcribed Image Text

1. What is the value of a bond that has a par value of 1,000, acoupon rate of 7% (semi-annually), and matures in 10 years? Assumea required return of 5.5%. $1,114.20 $1,102.18 $1,087.62$1,058.342. What is the yield-to-maturity of a 5.0% semi-annual couponbond with a $1,000 par value, which matures in 3 years? Assume thecurrent market price of the bond is $1,081.95.1.08%2.15%2.16%5.00%

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