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
Related questions
Question
![What is the current value of a 30-year bond making semi-annual coupon
payments that has a face value of $1,000 and a coupon rate of 8%, if the
YTM is 4%, how much does the bond currently sell for? Does the bond sell
at a discount, premium, or at face value?
Reference the below formulas when solving the problem above:
PV = FV / (1+r)^t
FV = PV(1+r)^t
FVA = PMT(((1+r)^t) -1) / r
FVA = PMT((1+(r/12)^t(12))-1)/(r/12)
PVA = PMT(((1-(1+r)^-t) / r))
PVA = PMT((1-(1+(r/12))^-t(12)))/(r/12)
Bo = PMT ((1-(1+r/2)^-t(2))) / r/2 + FV / (1+r/2)^t(2)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff94c7fca-19c1-4a7a-bee1-f923048f618e%2Fe5e417e6-f46c-4ea1-8298-39c34c30e3fc%2F1b4q5ja_processed.png&w=3840&q=75)
Transcribed Image Text:What is the current value of a 30-year bond making semi-annual coupon
payments that has a face value of $1,000 and a coupon rate of 8%, if the
YTM is 4%, how much does the bond currently sell for? Does the bond sell
at a discount, premium, or at face value?
Reference the below formulas when solving the problem above:
PV = FV / (1+r)^t
FV = PV(1+r)^t
FVA = PMT(((1+r)^t) -1) / r
FVA = PMT((1+(r/12)^t(12))-1)/(r/12)
PVA = PMT(((1-(1+r)^-t) / r))
PVA = PMT((1-(1+(r/12))^-t(12)))/(r/12)
Bo = PMT ((1-(1+r/2)^-t(2))) / r/2 + FV / (1+r/2)^t(2)
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