Bond P is a premium bond with an 9 percent coupon, a YTM of 7.75 percent, and 15
ID: 2723873 • Letter: B
Question
Bond P is a premium bond with an 9 percent coupon, a YTM of 7.75 percent, and 15 years to maturity. Bond D is a discount bond with an 9 percent coupon, a YTM of 10.75 percent, and also 15 years to maturity. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 5 years? In 10 years? In 14 years? In 15 years? (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)
Please answer any parts you are able to get, even if its not all of the answers. As much as you can will help. Thank you.
Bond P is a premium bond with an 9 percent coupon, a YTM of 7.75 percent, and 15 years to maturity. Bond D is a discount bond with an 9 percent coupon, a YTM of 10.75 percent, and also 15 years to maturity. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 5 years? In 10 years? In 14 years? In 15 years? (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)
Explanation / Answer
The price of the bond is obtained by the excel formula as in = pv(rate,nper,pmt,fv) where rate = 0.0775/2, nper = 14*2, pmt = 90/2 and fv =1000 for the P bond after 1 year, = pv(0.0775/2, 14*2,90/2,1000) = 1,105.66
The table is tabulated in the same manner:
Bond P Bond D 1 year $ 1,105.66 $ 874.79 5 years $ 1,085.89 $ 894.34 10 years $ 1,051.01 $ 933.65 14 years $ 1,011.81 $ 983.82 15 years $ 1,000.00 $ 1,000.00