Purchase Solution

Calculate: Bond Price

Not what you're looking for?

Ask Custom Question

Question: Midland Oil has $1,000 par value bonds outstanding at 8 percent interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity:

a. 7 percent
b. 10 percent
c. 13 percent

Purchase this Solution
Solution Summary

This solution illustrates how to calculate bond price for different yields to maturity. All calculations are included.

Solution Preview

Midland Oil has $1,000 par value bonds outstanding at 8 percent interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity:

a. 7 percent
b. 10 percent
c. 13 percent

Solution:
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

a. 7%

Price of bond
Coupon rate = 8.000%
Face value = $1,000
Interest payment per year = $80.00 =8.% x 1000

Frequency = S Semi ...

Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • Bond prices

    Based on this information a) Calculate this bond's closing price for today b) Calculate yesterday's price of this bond a) Calculate this bond's closing price for today Prices represent a percentage of a bond's $1,000 face value.

  • Effective Bond Duration; effective convexity; price change

    Face Value of bond=100 Price of bond Po=110.7811 Coupon rate 6.25% of face value=6.25 Time to maturity=10 years Let us calculate YTM of a bond using IRR function in MS Excel Year End Cash flow 0 -110.7811 (Price of bond

  • how to calculate the return you will have earned

    Return from bond = (current bond price + annual coupon - purchase price)/purchase price = (1,037.72 + 60 - 1,000)/1,000 = 9.77% This solution is comprised of a detailed explanation to calculate the return you will have earned.

  • Bond Duration Calculation

    Calculate the total percentage price change (duration and convexity) to a 65 basis point decrease in interest rates for the bond in Questions 5 and 6.

  • Convertible Bonds

    We calculate the straight value assuming annual payments of coupon interest (since nothing is mentioned) Calculating Value of a bond To calculate the price of the bond we need to calculate / read

  • Calculating Current Price and YTM

    The bond requires annual coupon payments. The face value is $1,000. Calculate the current price of the bond if the yield to maturity is 9%.

  • Bond Prices Calculations

    Bond X: 10 years from now Bond Price = = = = $1,289.32 Bond Y: 10 years from now Bond Price = = = = $756.579 The solution includes a step by step instructions on how to calculate bond prices, as well as an

  • Financial Management: keystrokes on a TI BA II to solve a YTM, YTC bond problem

    After that the bond can be called at 107.5. Interest rates have declined and the bond now sells for 115.5% of par. You must find the YTM and YTC. 1. Calculate the YTM in Year 2005 for the bond. Calculate the YTC. 2.

  • Price of a bond

    compounded semiannually Semiannual payments Calculate the price of this bond if the stated annual interest rate, compounded semiannually, is a. 8 percent b. 10 percent c. 6 percent a To calculate the price of the bond we need to calculate

  • Valuing Bonds-Bond Yields, Price of bonds, Bond returns

    32299 Valuing Bonds-Bond Yields ( current yield, yield to maturity), Bond returns, Price of bonds, How do I calculate Bond Yields: An AT&T bond has 10 years until maturity, a coupon rate of 8 percent, and sells for $1,000?

View More Related Solutions