Question

Bond and Stock Evaluation and Value problem. Use the Bond Pricing or Stock Pricing formulas. Show all of your work! DO NOT USE EXCEL or steps to use on Excel.

1. A bond with a coupon rate of 7.30% has a price that today equals $868.92. The $1.000 face value bond pays coupon every 6 months, 30 coupons remain, and a coupon was paid yesterday. Suppose you buy this bond at today's price and hold it so that you receive 20 coupons. You sell the bond upon receiving that last coupon. Find the selling price if the bond's YTM remains constant. Note that the number of coupons left is the same as "n" at the time of pricing.

Answer 1

Regards.

Coupon rate = 7.3% compounded semi- annually .. Coupon rate = 7.3/2 = 3.65% Date Page Purchase price = $ 868-92 Face value = $ 1000 YTM = C + Ev-Pv 365+ 1000 -868.92 Fvt pu 1000+ 868.92 2 Remaining coupon payment = 20 coupon (c) = 3.65 % of $1000 = $36.5 : YTM = 0.046 36.5 + 6.55 934. 46 YTM = 4.6% Bond Price = c/1-1/(1+ = 365 [L- 1 / (1+0:04)? 0.046 = 36.5 [ 1-0.29 / 0.046 = 3615 [15:45 = $100.44