Question

​(Bond valuation​) Calculate the value of a bond that will mature in 19 years and has a ​$1,000 face value. The annual coupon interest rate is 12 percent, and the​ investor's required rate of return is 9 percent.

The value of the bond is ​$ .​ (Round to the nearest​ cent.)

Answer 1

Required rate of return, RATE # of Years to maturity, NPER Annual coupon Maturity value at the end, FV Annual coupon type, TYPE Value of the bond 9% 19 $120 [$1,000 x 12%-$120] $1,000 [Face value of the bond] payment, PMT 0 =0 if coupons paid at the end of each period; 1 if coupons paid at the beginning of each period $1,268.50 [Ref: NOTE] NOTE Value of the bond is calculated using EXCEL FUNCTION PV(rate,nper,pmt,fv,type) where rate-9%; nper=19; pmt-120; fv=-1000, type-0. Here value for pmt & fv are negative as they denote cash inflows; type 0 because coupons paid at the end of each year only 1 Required rate of return, RATE 2 # of Years to maturity, NPER 3 Annual coupon payment, PMT 4 Maturity value at the end, FV 5 Annual coupon type, TYPE 6 Value of the bond 9% 19 :84*12% [$1,000 x 12% = $120] $1,000 [Face value of the bond] 00 if coupons paid at the end of each period; 1 if coupons paid at the beginning of each period -PV(B1,B2,-B3,-B4,B5) [Ref: NOTE]