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Bonds- Market Value, Issuance price

A ten-year bond, with par value equals $1000, pays 10% annually. If similar bonds are currently yielding 6% annually, what is the market value of the bond? Use semi-annual analysis.

a) $1,000.00

b) $1127.50

c) $1297.85

d) $2549.85

A 30-year zero-coupon bond that yields 12% percent is issued with a $1000 par value. What is the issuance price of the bond (round to the nearest dollar)?

a) $33

b) $83

c) $8333

d) $none of the above

Solution Preview

A ten-year bond, with par value equals $1000, pays 10% annually. If similar bonds are currently yielding 6% annually, what is the market value of the bond? Use semi-annual analysis.

a) $1,000.00

b) $1127.50

c) $1297.85

d) $2549.85

Answer: c) $1297.85 (see calculation below)

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 ...

Solution Summary

The solution calculates the Market Value of a bond that is paying semi-annual interest and issuance price of a zero-coupon bonds.

$2.19