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Calculate - Bond Price, Coupon Rate, Face Value

1. Assume that a bond will make payments every six months as shown on the following time-line (using six months periods):

0------1------2-------3---------------------20
$20 $20 $20 $20 + $1000

a) What is the maturity of the bond (in years)?
b) What is the coupon rate (in percent)?
c) What is the face value?

2. Suppose the current zero-coupon yield curve for risk-free bonds is as follows:

Maturity (years) 1 2 3 4 5
YTM 5.00% 5.50% 5.75% 5.95% 6.05%

a) What is the price per $100 face value of a two-year, zero-coupon, risk-free bond?

b) What is the price per $100 face value of a four-year, zero-coupon, risk-free bond?

c) What is the risk-free interest rate for a five-year maturity?

3. Suppose a seven-year, $1000 bond with an 8%coupon rate and semiannual coupons is trading with a yield to maturity of 6.75%

a) Is this bond currently trading at a discount, at par, or at a premium? Explain.

b) If the yield to maturity of the bond rises to 7% (APR with semiannual compounding), what price will the bond trade for?

Solution Summary

The solution computes Bond Price, Coupon Rate, Face Value for zero-coupon bonds in excel.

$2.19