Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Howard Corporation issued a bond that pays $200 annual coupon
Howard Corporation issued a bond that pays $200 annual coupon. The par value of the bond is $1000 with 3 yrs left to maturity. The going rate is 21% for these types of securities. There is a sudden decline in market rate and required changes to 20%. What will be the percent change in the value of this bond?
Expert Solution
We can calculate the value of the bond by using the following formula in excel:-
=-pv(rate,nper,pmt,fv)
Here,
PV = Value of the bond
Rate = 21%
Nper = 3 periods
Pmt = $200
FV = $1,000
Substituting the values in formula:
= -pv(21%,3,200,1000)
= $979.26
We can calculate the value of the bond by using the following formula in excel:-
=-pv(rate,nper,pmt,fv)
Here,
PV = Value of the bond
Rate = 20%
Nper = 3 periods
Pmt = $200
FV = $1,000
Substituting the values in formula:
= -pv(20%,3,200,1000)
= $1,000
Computation of the percentage change in the value of the bond:-
% change in the value of bond = ($1,000 - $979.26) / $979.26
= $20.74 / $979.26
= 2.12%
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
