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1. What is the price of a $1,000 par value bond with an 8% coupon rate paid annu

ID: 2657044 • Letter: 1

Question

1.         What is the price of a $1,000 par value bond with an 8% coupon rate paid annually, if the bond is priced to yield 8% and has 9 years to maturity?

    

2.         What would be the price of the bond in #1 if the yield decreased to 6%?

   

3.         What would be the price of the bond in #1 if the yield rose to 10% and was callable at 110% of par in 4 years?

                

4.         What is the yield to maturity for a Zero Coupon Bond that has 15 years left to maturity and is selling for $209?

Explanation / Answer

What is the price of a $1,000 par value bond with an 8% coupon rate paid annually, if the bond is priced to yield 8% and has 9 years to maturity?

Answer is $1000

As the YTM and Coupon Rate is Same the issue will bw at face value

2

What would be the price of the bond in #1 if the yield decreased to 6%?

.         What would be the price of the bond in #1 if the yield rose to 10% and was callable at 110% of par in 4 years?

What is the yield to maturity for a Zero Coupon Bond that has 15 years left to maturity and is selling for $209?

RATE = ?

NPER=15

PMT =0

PV=-209

FV=1000

=RATE(15,0,-209,1000)

=11.00%

Amount PV factor PV Interest Payment 80 6.8017 544.14 Maturity Value 1000 0.5919 591.90 Value of Bond 1,136.03