1. What is the value of a semi-annual interest bond with 8 years to maturity, 5%

Question

1. What is the value of a semi-annual interest bond with 8 years to maturity, 5% annual coupon, $1,000 par value, and currently priced to yield 4.3%

2. Suppose that you are interested in buying a bond that pays interest semi-annually. It has an annual coupon of 6% with interest payable on June 15th and December 15th. The bond accrued interest is determined using a 30/360 day count street convention. If the bond is currently priced at $1,050, what is the invoice price for the bond using a settlement date of April 13, 2016? (Show your work)

3. You have $250,000 invested in bond A which has a modified duration of 3 and $175,000 invested in bond B which has a modified duration of 12. If interest rates rise by 50 basis points, your portfolio would gain/lose approximately how much money? (State gain or loss and the dollar amount of change). SHOW ALL WORK Comment

Explanation / Answer

1)

Face value (FV) $                                         1,000 Coupon rate 5.00% Number of compounding periods per year 2 Interest per period (PMT) $                                               25 Number of years to maturity 8 Number of compounding periods till maturity (NPER) 16 Market rate of return/Required rate of return 4.30% Market rate of return/Required rate of return per period (RATE) 2.15% Bond price PV(RATE,NPER,PMT,FV)*-1 Bond price $                                   1,046.96

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