Question

Bond value and changing required returns and has a bond issue outstanding that will mature to $1000 par value in 15 years. The band has a coupon interrate of and pays interest anual Find the value of the bond the required retumis (1)9%. (2) 13% and (3) 0% b. Use your inding in porta and the graph here to discuss the relationship between the coupon interest rate on a bond and the required return and the value of the band relative to its par value 6. What two poi s ons could the murdum to offer from the coupon interest rate? (1) The value of the bond the required rums Round to the nearest ) (2) The value of the bond the required return is 13%, Round to the nearestent) 2) The value of the bond, the drum is , is round to the nearest cent) b. Uveyourg in partn er here the following questions: Select from the drop down menus) Whe r e is the one that is the parole When the re is the on the ma is para A Texas

Answer 1

As per rules I am answering the first 4 subparts of the question

1: Using financial calculator Input: FV= 1000; N=15, PMT=9%*1000=90

I/Y=9

Solve for PV as 1000

Price of the bond = $1000

2: Using financial calculator Input: FV= 1000; N=15, PMT=9%*1000=90

I/Y=13

Solve for PV as -741.50

Price of the bond = $741.50

3: Using financial calculator Input: FV= 1000; N=15, PMT=9%*1000=90

I/Y=6

Solve for PV as 1291.37

Price of the bond = $1291.37

4: greater than

Since the bond is offering a return greater than the market rate, the bond is in greater demand and its price will be at premium.