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Bond X is a premium bond making semiannual payments
Bond X is a premium bond making semiannual payments. The band has a coupon rate of 88 percenta Yn of 60 percent and has 13 years to maturity. Bond Yacount Dond making semiannual payments. This bond has a coupon rate of 6 8 percent a YTM of 8 percent and has 13 years to matty Assume the best eman undanged and both bonds tuve a par value of $1,000
Expert Solution
| Current Bond price |
| X Bond |
| K = Nx2 |
| Bond Price =∑ [( Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
| k=1 |
| K =13x2 |
| Bond Price =∑ [(8.8*1000/200)/(1 + 6.8/200)^k] + 1000/(1 + 6.8/200)^13x2 |
| k=1 |
| Bond Price = 1170.81 |
| Y Bond |
| K = Nx2 |
| Bond Price =∑ [( Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
| k=1 |
| K =13x2 |
| Bond Price =∑ [(6.8*1000/200)/(1 + 8.8/200)^k] + 1000/(1 + 8.8/200)^13x2 |
| k=1 |
| Bond Price = 846.92 |
| Price in 1 year |
| X Bond |
| K = Nx2 |
| Bond Price =∑ [( Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
| k=1 |
| K =12x2 |
| Bond Price =∑ [(8.8*1000/200)/(1 + 6.8/200)^k] + 1000/(1 + 6.8/200)^12x2 |
| k=1 |
| Bond Price = 1162.28 |
| Y Bond |
| K = Nx2 |
| Bond Price =∑ [( Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
| k=1 |
| K =12x2 |
| Bond Price =∑ [(6.8*1000/200)/(1 + 8.8/200)^k] + 1000/(1 + 8.8/200)^12x2 |
| k=1 |
| Bond Price = 853.59 |
| Price in 3 year |
| X Bond |
| K = Nx2 |
| Bond Price =∑ [( Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
| k=1 |
| K =10x2 |
| Bond Price =∑ [(8.8*1000/200)/(1 + 6.8/200)^k] + 1000/(1 + 6.8/200)^10x2 |
| k=1 |
| Bond Price = 1143.42 |
| Y Bond |
| K = Nx2 |
| Bond Price =∑ [( Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
| k=1 |
| K =10x2 |
| Bond Price =∑ [(6.8*1000/200)/(1 + 8.8/200)^k] + 1000/(1 + 8.8/200)^10x2 |
| k=1 |
| Bond Price = 868.79 |
| Price in 8 year |
| X Bond |
| K = Nx2 |
| Bond Price =∑ [( Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
| k=1 |
| K =5x2 |
| Bond Price =∑ [(8.8*1000/200)/(1 + 6.8/200)^k] + 1000/(1 + 6.8/200)^5x2 |
| k=1 |
| Bond Price = 1083.59 |
| Y Bond |
| K = Nx2 |
| Bond Price =∑ [( Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
| k=1 |
| K =5x2 |
| Bond Price =∑ [(6.8*1000/200)/(1 + 8.8/200)^k] + 1000/(1 + 8.8/200)^5x2 |
| k=1 |
| Bond Price = 920.48 |
| Price in 12 year |
| X Bond |
| K = Nx2 |
| Bond Price =∑ [( Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
| k=1 |
| K =1x2 |
| Bond Price =∑ [(8.8*1000/200)/(1 + 6.8/200)^k] + 1000/(1 + 6.8/200)^1x2 |
| k=1 |
| Bond Price = 1019.02 |
| Y Bond |
| K = Nx2 |
| Bond Price =∑ [( Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
| k=1 |
| K =1x2 |
| Bond Price =∑ [(6.8*1000/200)/(1 + 8.8/200)^k] + 1000/(1 + 8.8/200)^1x2 |
| k=1 |
| Bond Price = 981.25 |
| Price in 13 year |
| X Bond |
| K = Nx2 |
| Bond Price =∑ [( Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
| k=1 |
| K =0x2 |
| Bond Price =∑ [(8.8*1000/200)/(1 + 6.8/200)^k] + 1000/(1 + 6.8/200)^0x2 |
| k=1 |
| Bond Price = 1000 |
| Y Bond |
| K = Nx2 |
| Bond Price =∑ [( Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
| k=1 |
| K =0x2 |
| Bond Price =∑ [(6.8*1000/200)/(1 + 8.8/200)^k] + 1000/(1 + 8.8/200)^0x2 |
| k=1 |
| Bond Price = 1000 |
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