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Calculate the following amounts for these bond scenarios: a) Compute the bond price quoted at 97 b) Compute the bond price quoted at 116
Calculate the following amounts for these bond scenarios:
a) Compute the bond price quoted at 97
b) Compute the bond price quoted at 116.50 (hint bond prices are quoted as a percentage of par(face value) of the bond)
c) What is the annual coupon for a 5.15% bond?
d) Calculate the price of a Zero Coupon bond that matures in 15 years with a market rate of 5.75%
e) Calculate the rate of a Zero Coupon bond that matures in 15 years with a market price of 48.
Expert Solution
a) Computation of the price of bond:-
Bond price = Par value * Bond quoted
= $1,000 * 97%
= $970
b) Computation of the price of bond:-
Bond price = Par value * Bond quoted
= $1,000 * 116.50%
= $1,165
c) Computation of the annual coupon:-
Annual coupon = Par value * Coupon rate
= $1,000 * 5.15%
= $51.50
d) We can calculate the price of bond by using the following formula in excel:-
=-pv(rate,nper,pmt,fv)
Here,
PV = Price of bond
Rate = 5.75%
Nper = 15 periods
Pmt = 0
FV = $1,000
Substituting the values in formula:
= -pv(5.75%,15,0,1000)
= $432.31
e) We can calculate the interest rate by using the following formula in excel:-
=rate(nper,pmt,-pv,fv)
Here,
Rate = Interest rate
Nper = 15 periods
Pmt = 0
PV = $48
FV = $100
Substituting the values in formula:
= rate(15,0,-48,100)
= 5.01%
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