Explain what you see from the pricing calculations. How do the two bonds differ?
Bond C
Given: n = Period which takes values from 0 to the nth period = 0,1,2,3 & 4
Cn = Coupon payment in the nth period = 10%*$1,000 = $100
YTM = interest rate or required yield = 9.6%
P = Par Value of the bond = $1,000
Bond Z
Bond Price = PV(rate,nper,pmt,fv)
Given: n = Period which takes values from 0 to the nth period = 0,1,2,3 & 4
Cn = Coupon payment in the nth period = 0%*$1,000 = $0.00
YTM = interest rate or required yield = 9.6%
P = Par Value of the bond = $1,000
|
years |
Bond A |
Bond Z |
|
4 |
$1,012.79 |
$693.04 |
|
3 |
$1,010.02 |
$759.57 |
|
2 |
$1,006.98 |
$832.49 |
|
1 |
$1,003.65 |
$912.41 |
|
0 |
$1,000.00 |
$1,000.00 |
Bond:
It is a debt instrument issued by the company for the purpose of raising capital. The holders of bonds are the investors who invested in the company and receive interest payments during the life of the bond.
Step by step
Solved in 4 steps with 1 images
