Bond Value : Solution set
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$1,000 par value bond outstanding that pays 9 percent annual interest. The current yield to maturity on such bonds in the market is 12 percent. Compute the price of the bonds for these maturity dates:
30 years
15 years
1 year
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Solution Summary
The solution calculates price of bonds for different maturity dates, given annual interest and the current yield to maturity.
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$1,000 par value bond outstanding that pays 9 percent annual
interest. The current yield to maturity on such bonds in the market is 12 percent.
Compute the price of the bonds for these maturity dates:
30 years
15 years
1 year
To calculate the price of the bond we need to calculate / read from tables the values of
PVIF= Present Value Interest Factor
PVIFA= Present Value Interest Factor for an Annuity
Price of bond= PVIF * Redemption value + PVIFA * interest payment per period
PVIFA( n, r%)= =[1-1/(1+r%)^n]/r%
PVIF( n, r%)= =1/(1+r%)^n
No of years to maturity= 30
Price of bond
Coupon ...
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