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