Explore BrainMass

Bond Prices Calculations

Have 2 bonds x and y (both make annual payments)
bond x is a premium bond , pays a 10% coupon, has a ytm of 5 % and 17 years to maturity.
bond y is a discount bond, pays a 5% coupon, has a ytm of 10% and 17 years to maturity.
i have to find out the value of the bonds 6 and 10 years from now :(if interest rates remain unchanged )

i used the following formula the professor gave me :
c(1/i - 1/ i(1+i)n ) + 1000( 1/ (1+i)n

each i = the intrest rate and the n is the exponent= to 17

my answers are:
bond x = $1,563.703314
bond y = $598.9223346 but i still have to find the prices for 6 and 10 years ahead. How would i do so.

© BrainMass Inc. brainmass.com June 21, 2018, 2:37 am ad1c9bdddf

Solution Preview

Please see the attached files for a better formated solution

I am attaching an excel sheet to show you how to calculate the Bond Price using Excel.

Now, 6 years ahead would mean that the bonds would have 11 years to maturity, so instead of using 17 as an exponent, we would use 11 as an exponent, ...

Solution Summary

The solution includes a step by step instructions on how to calculate bond prices, as well as an excel sheet that uses excel built-in functions to calculate bond prices.