Bond valuation-Semiannual interest Calculate the value of each of the bonds show
ID: 2569161 • Letter: B
Question
Bond valuation-Semiannual interest Calculate the value of each of the bonds shown in the following table, all of which pay interest semiannually. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Coupon interest rate ars to Required stated matur Bond Par Value annual return 500 1,000 500 8% 10% 20 13 16 The value of bond A is $1 (Round to the nearest cent.) Enter your answer in the answer box and then click Check Answer Clear All Check Answer remainingExplanation / Answer
Value of the bond = Coupon [ PVA] + Maturity value [ PV]
Coupon = Par value ---> 500 * 8% * 1/2 = 20 ( since semi annual)
n = 9 years * 2 = 18 shall be taken. r = yield to maturity = 10% / 2 = 5% or 0.05
PVA = [ 1 - (1+r)-n ] / r = [ 1 - (1.05)-18 ] / 0.05 = 11.6895869
PV = (1.05)-18 = 0.41552065
Bond price = 20 * 11.6895869 + 500 * 0.41552065 = 441.55.............final answer
Bond - B = 55 [ 1 - (1.07)-40 ] / 0.07 + 1000 [ 1.07)-40
= 733.24 + 66.78 = 800.02......................final answer
Bond - C = 32.5 [ 1 - (1.08)-8 ] / 0.08 + 500 [ 1.08)-8
= 219.48 + 270.13 = 489.61......................final answer