Homework: Homework 4 Score: 0 of 1 pt B9-4 (book/static) Save 2 of 7 (1 complete
ID: 2656415 • Letter: H
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Homework: Homework 4 Score: 0 of 1 pt B9-4 (book/static) Save 2 of 7 (1 complete) HW Score: 14.29%, 1 of 7 pt Question Help * (Related to Checkpoint 9.4) (Bond valuation) A bond that markets required yield to maturity on a comparable-risk bond is 15 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannualy? matures in 10 years has a $1,000 par value. The annual coupon interest rate is 9 percent and the a. The value of this bond if t paid interest annully would be s(Round to the nearest cent.)Explanation / Answer
Statement showing value of bond when interest is paid annually ( face value=$1000, time= 10 years, interest= 1000*0.09= $90, yield= 15%) Particulars Time PVf @15% Amount PV Cash Flows (Interest) 1.00 0.8696 90.00 78.26 Cash Flows (Interest) 2.00 0.7561 90.00 68.05 Cash Flows (Interest) 3.00 0.6575 90.00 59.18 Cash Flows (Interest) 4.00 0.5718 90.00 51.46 Cash Flows (Interest) 5.00 0.4972 90.00 44.75 Cash Flows (Interest) 6.00 0.4323 90.00 38.91 Cash Flows (Interest) 7.00 0.3759 90.00 33.83 Cash Flows (Interest) 8.00 0.3269 90.00 29.42 Cash Flows (Interest) 9.00 0.2843 90.00 25.58 Cash Flows (Interest) 10.00 0.2472 90.00 22.25 Cash flows (Maturity Amount) 10.00 0.2472 1,000.00 247.20 Intrinsic Value of Bond or Current Bond Price 698.89 Value of bond when interest is paid annually is $698.89 Statement showing Price or Intrinsic Value ( since there are semi annual payment so coupon payment is 1000*0.09/2=$45, yield is 7.5% and number of years= 20) Particulars Time PVf @7.5% Amount PV Cash Flows (Interest) 1.00 0.9302 45.00 41.86 Cash Flows (Interest) 2.00 0.8653 45.00 38.94 Cash Flows (Interest) 3.00 0.8050 45.00 36.22 Cash Flows (Interest) 4.00 0.7488 45.00 33.70 Cash Flows (Interest) 5.00 0.6966 45.00 31.35 Cash Flows (Interest) 6.00 0.6480 45.00 29.16 Cash Flows (Interest) 7.00 0.6028 45.00 27.12 Cash Flows (Interest) 8.00 0.5607 45.00 25.23 Cash Flows (Interest) 9.00 0.5216 45.00 23.47 Cash Flows (Interest) 10.00 0.4852 45.00 21.83 Cash Flows (Interest) 11.00 0.4513 45.00 20.31 Cash Flows (Interest) 12.00 0.4199 45.00 18.89 Cash Flows (Interest) 13.00 0.3906 45.00 17.58 Cash Flows (Interest) 14.00 0.3633 45.00 16.35 Cash Flows (Interest) 15.00 0.3380 45.00 15.21 Cash Flows (Interest) 16.00 0.3144 45.00 14.15 Cash Flows (Interest) 17.00 0.2925 45.00 13.16 Cash Flows (Interest) 18.00 0.2720 45.00 12.24 Cash Flows (Interest) 19.00 0.2531 45.00 11.39 Cash Flows (Interest) 20.00 0.2354 45.00 10.59 Cash flows (Maturity Amount) 20.00 0.2354 1,000.00 235.40 Intrinsic Value of Bond or Current Bond Price 694.15 Value of bond when interest is paid semi annually is $694.15
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