An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 9.4%. Bond C pays a 10% annual coupon, while Bond Z is a zero coupon bo The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Assuming that the yield to maturity of each bond remains at 9.4% over the next 4 years, calculate the price of the bonds at each of the following years to maturity. Do not round intermediate calculations. Round your answers to t nearest cent. Years to Maturity Price of Bond C 4 3 2 0 $ $ $ $ Price of Bond Z $ $
An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 9.4%. Bond C pays a 10% annual coupon, while Bond Z is a zero coupon bo The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Assuming that the yield to maturity of each bond remains at 9.4% over the next 4 years, calculate the price of the bonds at each of the following years to maturity. Do not round intermediate calculations. Round your answers to t nearest cent. Years to Maturity Price of Bond C 4 3 2 0 $ $ $ $ Price of Bond Z $ $
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Excel Online Structured Activity: Bond valuation
An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 9.4%. Bond C pays a 10% annual coupon, while Bond Z is a zero coupon bond.
The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.
X
Open spreadsheet
Assuming that the yield to maturity of each bond remains at 9.4% over the next 4 years, calculate the price of the bonds at each of the following years to maturity. Do not round intermediate calculations. Round your answers to the
nearest cent.
Years to Maturity Price of Bond C
4
3
2
1
0
$
$
$
$
$
Price of Bond Z
$
$
$
$
$
Transcribed Image Text:e
3
F
5 Face value
5 Yield to maturity
7 Annual coupon
3
(
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
Bond valuation
0
1
2
3
4
5
6
7
Length of maturity in years
Years to Maturity
4
3
2
1
0
Bond Value
$350
$0
4
Bond C
4
$1,000
9.40%
10.00%
Price of
Bond C
3
Bond Z
4
$1,000
9.40%
0.00%
Price of
Bond Z
Price of Bond C
#N/A
#N/A
#N/A
#N/A
#N/A
Time Paths of Bonds C and Z
2
1
Years Remaining Until Maturity
0
Formulas
Price of Bond Z
#N/A
#N/A
#N/A
#N/A
#N/A
Bond C
Bond Z
Expert Solution
Step 1
Bond price
It is basically the present value of all cash inflows associated with a bond. In excel, it is calculated using 'PV' function where different input parameters as mentioned below are used.
- Rate: It is the yield to maturity (YTM) rate.
- Nper: It is a period to maturity.
- FV: It is the face value of the bond, which is to be received at the maturity of bond.
- PMT: It is the periodic coupon payment to be made at equal interval till the maturity of the bond.
- PV: It represents the price or current value of a bond.
The sign of PMT and FV should be oppositive of the sign of the PV as PMT and FV are the cash inflow while PV is the cash outflow for the investor.
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