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Homework answers / question archive / Bond valuation—Quarterly interest: Calculate the value of a ?$5,000?-par-value bond paying quarterly interest at an annual coupon interest rate of 12?% and having 6 years until maturity if the required return on? similar-risk bonds is currently a 11?% annual rate paid quarterly
Bond valuation—Quarterly interest: Calculate the value of a ?$5,000?-par-value bond paying quarterly interest at an annual coupon interest rate of 12?% and having 6 years until maturity if the required return on? similar-risk bonds is currently a 11?% annual rate paid quarterly.
The present value of the bond is ?$ __________ (Round in two decimal places)
Bond valuation—Semiannual interest Calculate the value of each of the bonds shown in the following? table, all of which pay interest semiannually. ?(Click on the icon here in order to copy the contents of the data table below into a? spreadsheet.)
Coupon Years to Required stated
Bond Par Value interest rate maturity annual return
A $1,000 7% 9 11%
B 500 13 20 12
Cc 500 15 4 12
The value of bond A is ?$_______________ Round in two decimal places)
The value of bond B is ?$_______________ Round in two decimal places)
The value of bond C is ?$_______________ Round in two decimal places)
1) Computation of Present Value of Bond using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Present Value = ?
Rate = 11%/4 = 2.75% compounded quarterly
Nper = 6 Years*4 quarters = 24 quarters
PMT = $5,000*12%/4 = $150
FV = $5,000
Substituting the values in formula:
=-pv(2.75%,24,150,5000)
PV or Present Value of Bond = $5,217.51
2)
Computation of Present Value of Bond A using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Present Value = ?
Rate = 11%/2 = 5.50% compounded periods
Nper = 9 Years*2 periods = 18 periods
PMT = $1,000*7%/2 = $35
FV = $1,000
Substituting the values in formula:
=-pv(5.50%,18,35,1000)
PV or Present Value of Bond = $775.08
Computation of Present Value of Bond B using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Present Value = ?
Rate = 12%/2 = 6% compounded periods
Nper = 20 Years*2 periods = 40 periods
PMT = $500*13%/2 = $32.5
FV = $500
Substituting the values in formula:
=-pv(6%,40,32.50,500)
PV or Present Value of Bond = $537.62
Computation of Present Value of Bond C using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Present Value = ?
Rate = 12%/2 = 6% compounded periods
Nper = 4 Years*2 periods = 8 periods
PMT = $500*15%/2 = $37.50
FV = $500
Substituting the values in formula:
=-pv(6%,8,37.50,500)
PV or Present Value of Bond = $546.57
