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Homework answers / question archive / 1) The yield to matur't, of a bond with a 8

1) The yield to matur't, of a bond with a 8

Finance

1)

The yield to matur't, of a bond with a 8.6% coupon rate, semi-annual coupons. and two years to maturity is 9.25 What must its price be? Assume a face value of $1,000. Round the the nearest dollar e., nearest whole number, no decimals. 

 

2)

Saved Ryerson wants to raise $6,000 by issuing 11-year zero-coupon bonds. If the yield to maturity on the bonds will be 3.6%(EAR). what total face value amount of bonds most you issue? Round to the nearest dollar (no decimal places) Hint: The interest rate does not need to be changed in any way. Use the FV formulas to solve for the face value. 

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1) Computation of Bond Price using PV Function in Excel:

=-pv(rate,nper,pmt,fv)

Here,

PV = Price of Bond = ?

Rate = Yield to Maturity = 9.8%/2 = 4.9%

Nper = Number of Periods to Maturity = 2 years*2 = 4 Periods

PMT = Semiannual Coupon Payment = $1,000*8.6%/2 = 43

FV = Face Value = $1,000

Substituting the values in formula:

=-pv(4.9%,4,43,1000)

PV or Price of Bond = $978.67

 

2) Computation of Face Value using FV Function in Excel:

=-pv(rate,nper,pmt,fv)

Here,

FV = Face Value of Bond = ?

Rate = Yield to Maturity = 3.6%

Nper = Number of Periods to Maturity = 11 Years

PMT = Coupon Payment = 0

PV = Bond Price = $6,000

Substituting the values in formula:

=fv(3.6%,11,0,-6000)

FV or Face Value = $8,853.37

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