Even though most corporate bonds in the United States make coupon payments semia
ID: 2741676 • Letter: E
Question
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 25 years to maturity, and a coupon rate of 6.3 percent paid annually.
If the yield to maturity is 7.4 percent, what is the current price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 25 years to maturity, and a coupon rate of 6.3 percent paid annually.
Explanation / Answer
redemption value = 25 years; YTM 7.4% ;coupon 1000*6.3% = 63
Bond value = 876.3
Year Cashflows PVF @ 7.4% Disc value 1 63 0.931 58.659 2 63 0.867 54.618 3 63 0.807 50.854 4 63 0.752 47.350 5 63 0.700 44.088 6 63 0.652 41.050 7 63 0.607 38.222 8 63 0.565 35.588 9 63 0.526 33.136 10 63 0.490 30.853 11 63 0.456 28.727 12 63 0.425 26.748 13 63 0.395 24.905 14 63 0.368 23.189 15 63 0.343 21.591 16 63 0.319 20.104 17 63 0.297 18.718 18 63 0.277 17.429 19 63 0.258 16.228 20 63 0.240 15.110 21 63 0.223 14.069 22 63 0.208 13.099 23 63 0.194 12.197 24 63 0.180 11.356 25 63 0.168 10.574 25 1000 0.168 167.839 Total 876.300Related Questions
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