Calculating Bond Price and Yield to Maturity
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Siddhartha Bank has a bond currently trading at NEPSE @ Rs. 1200 per bond, the bond has remaining maturity period of 6 years, the bond pays 10% coupon rate on face value. The current market interest rate is 12%, value this bond with appropriate valuation model and decide whether you invest in this bond or not, why? Also explain the relationship between value of bond and market interest rate?
For this same bond if you want to purchase it at current market price and hold it until the maturity what is yield to maturity (YTM) of this bond calculate with interpolation method?
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Solution Summary
The solution is provided in excel and shows step by step calculations of the requirements. If you stop at any cell, you will be able to see how the figure was calculated. If you change the inputs, excel would automatically calculate the solutions.
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- BA, Ain Shams University, Cairo Egypt
- MBA, California State University, Sacramento
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