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Title: How to Calculate Bond Value
Description: This note goes into depth on how to calculate bond values complete with example!!
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II

Unit VI Assignment Question 1
CSU Math Center | 1-800-977-8449 x6538 | teamsucceed@columbiasouthern
...
adobeconnect
...
The annual coupon
interest rate is 8 percent and the market’s required yield to maturity on a comparable-risk bond is 12
percent
...
08
π‘€π‘Žπ‘‘π‘’π‘Ÿπ‘–π‘‘π‘¦ (π‘¦π‘’π‘Žπ‘Ÿπ‘ ) = 𝑛 = 12
π‘Œπ‘–π‘’π‘™π‘‘ π‘‡π‘œ π‘€π‘Žπ‘‘π‘’π‘Ÿπ‘–π‘‘π‘¦ = π‘Œπ‘‡π‘€ = 12% = 0
...
12)12
π΅π‘œπ‘›π‘‘ π‘‰π‘Žπ‘™π‘’π‘’ = (0
...
12)12
0
...
12)12
π΅π‘œπ‘›π‘‘ π‘‰π‘Žπ‘™π‘’π‘’ = ($80) [
] + $1,000 [
]
(1
...
12

π΅π‘œπ‘›π‘‘ π‘‰π‘Žπ‘™π‘’π‘’ = ($80) [

1βˆ’

π΅π‘œπ‘›π‘‘ π‘‰π‘Žπ‘™π‘’π‘’ = ($80) [

1
3
...
12
3
...
25667
] + $1,000[0
...
12

π΅π‘œπ‘›π‘‘ π‘‰π‘Žπ‘™π‘’π‘’ = ($80) [

0
...
25667]
0
...
19442] + $1,000[0
...
55 + $256
...
22
This bond sells at a discount, since investors require a higher return (12%) than is offered by the
bond’s coupons (8%)
...


We also could have solved for the bond’s price using Excel’s PV function:
=PV(rate, nper, pmt, fv) = PV(12%, 12, 80, 1000) β†’ 𝑃𝑉 = $752
...
23 will be displayed
Title: How to Calculate Bond Value
Description: This note goes into depth on how to calculate bond values complete with example!!
Buy These NotesPreview