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    Calculating Bonds and Yield to Maturity

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    What are bonds? How is the value of a bond calculated? What is the yield to maturity (YTM), and how is it used in bond valuation? Compare the Eurobond to US government bonds. Discuss how they are similar and how they differ.
    Include a spreadsheet showing your calculations.

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    Solution Preview

    A bond payable is just a promise to pay a stream of payments over time (the interest component), and a fixed amount at maturity (the face amount). Thus, it is a blend of an annuity (the interest) and lump sum payment (the face). To determine the amount an investor will pay for a bond, therefore, requires present value computations to determine the current worth of the future payments.
    Value of Bond= Present value of interest received+ Present value of Lump sum amount


    Meaning of Euro Bond

    "Eurobond is a bond issued and traded in a country other than the one in which its currency is denominated. A Eurobond does not necessarily have to originate or end up in Europe although most debt instruments of this type are issued by non-European ...

    Solution Summary

    This solution provide answers to bonds and yield to maturity in Excel.