Explore BrainMass

Bond Valuation

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Determine the price of a Canadian government bond as of January 1, 2007 with face value F=$1000, YTM of r=5%, a semi annual coupon of 6.375% if the bond matures on December 31, 2011.

i got p= 920.70

with function 1000/(1+0.05/2)^10 + (1000*0.06375/2)/0.05 * [ 1- 1/(1+0.05/2)^10]

however if i follow the formula the mid part should be (1000*0.0675)/0.05 but the answer will be $1060.15 which higher than face value...

which one is right?

© BrainMass Inc. brainmass.com October 24, 2018, 10:05 pm ad1c9bdddf

Solution Preview

Since the YTM is lower than the face value, the price will be higher than then ...

Solution Summary

The solution explains how to determine the price of a bond. The semi annual coupon and bond matures are determined.

See Also This Related BrainMass Solution

Stock Valuation versus Bond Valuation

Why is stock valuation considerably less precise than bond valuation? Can you give at least two reasons. Would it be possible to provide some industry references?

Thank you.

View Full Posting Details