Question

A Ford Motor Co. coupon bond has a coupon rate of 6.8​%, and pays annual coupons. The next coupon is due tomorrow and the bond matures 28 years from tomorrow. The yield on the bond issue is 6.35​%. At what price should this bond trade​ today, assuming a face value of ​$1,000​?

Answer 1

A B с D E F H 34 35 Coupon rate 6.80% annually 36 Face value of bond, FV $1,000 37 No. of years,nper 28 years 38 YTM,rate 6.35% Annual Coupon amount,pmt 39 (face value*coupon rate) $68.00 annually 40 41 Using Excel function for price of the bond today- 42 Price today = Pv of all coupons paid for 28 years and face value of bond at the end of 28th year) + Coupon paid tommorow 43 PV=PV(rate,nper,pmt,fv, type) + Coupon amount paid tomorrow 44 $ 1,126.22 45 46 Hence the current price of the bond is $ 1,126.22

A B C D E 0.068 annually 34 35 Coupon rate 36 Face value of bond, FV 37 No. of years,nper 38 YTM,rate 1000 28 0.0635 years Annual Coupon amount,pmt 39 (face value*coupon rate) =B35*B36 annually 40 41 Using Excel function for price of the bond today- 42 Price today = Pv of all coupons paid for 28 years and face value of bond at the end of 28th year) + Coupon paid tommorow 43 PV=PV(rate, nper,pmt, fv,type) + Coupon amount paid tomorrow 44 --PV(B38,837,839,836,0)+B39 45 46 Hence the current price of the bond is $ 1,126.22

Here, Fv is the future value of bond rate is the periodic interest rate nper is no. of periods pmt is the periodic payments Pv is the present value of bond type = 0 if the amount is paid at the end of the year 1 if it is paid at the beginning.
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