Question

in order to Bond valuation Semiannual interest Calculate the value of each of the bonds shown in the following table, all of which pay interest semiannually. (Click on the icon here copy the contents of the data table below into a spreadsheet.) Years to maturity Bond Coupon interest rate 8% 11 Required stated annual return 7% Par Value $1,000 1,000 100 15 13

Answer 1

Calculation is shown below

Name Box 1 Value of bond B C D E F Present value of coupon amount + Present value of par value 2 3 Using the PV function in excel we can calculate value of bond 4 Calculation of value of bond is shown below Bond A Bond B Bond C $1,000 $40 8 or value (FV) 9 Coupon amount (PMT) 10 No of payments (NPER) 11 Semi-annual yield (Rate) 12 Value of bond (PV) 22 $1,000 $100 $55 87 308 5.50% 6.50% $1,000.00 $103.04 3.50% $1,075.84

Following shows working

1 Value of bond Present value of coupon amo 3 Using the PV function in excel we can calculate value of bond 4 Calculation of value of bond is shown below 5 Bond A Bond B Bond C 100 8 Par value (FV) 9 Coupon amount (PMT) 10 No of payments (NPER) 11 Semi-annual yield (Rate) 12 Value of bond (PV) 1000 =B8*(8%/2) =1182 =792 =PV(B11, B10,-B9,-BS) 1000 =C8*(11%/2) =D8 (14%/2) =152 -42 =11%2 =1392 =PV(C11,C10,-C9,-CS) =PV(D11,D10,-D9,-DS)