Business, 28.03.2020 16:10 scottkayce

Microhard has issued a bond with the following characteristics:Par: $1,000Time to maturity: 15 years Coupon rate: 7 percent Semiannual paymentsCalculate the price of this bond if the YTM is:
a. 7 percent
b. 9 percent
c. 5 percent

Answers: 3

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Answers

Answer from: RayQuan115

a.) $1000

b.) $837.11

c.) $1,209.30

Explanation:

This type of bond is a coupon paying bond. Using a financial calculator, input the following for each value of YTM;

a.)

Face Value; FV = 1,000

Time to maturity of the bond; N = 15*2 = 30

Recurring coupon payment = coupon rate * Face value = (7%/2) *1000 = $35

So, coupon payment PMT = $35

Semiannual interest rate; I/Y = 7%/2 =3.5%

then compute the price of the bond; CPT PV = $1000

This bond is selling at par since the YTM = Coupon rate

b.)

The YTM in this case is higher than the coupon rate hence expect the price of the bond to be lower than the face value;

Face Value; FV = 1,000

Semiannual interest rate; I/Y = 9%/2 = 4.5%

Time to maturity of the bond; N = 30

Recurring coupon payment = coupon rate * Face value = (7%/2) *1000 = $35

So, coupon payment PMT = $35

next, compute the price of the bond; CPT PV = $837.11

This bond is selling at a Discount.

c.)

The YTM of 5% lower than the coupon rate hence expect the price of the bond to be higher than the face value;

Face Value; FV = 1,000

Semiannual interest rate; I/Y = 5%/2 = 2.5%

Time to maturity of the bond; N = 30

Recurring coupon payment = coupon rate * Face value = (7%/2) *1000 = $35

So, coupon payment PMT = $35

next, compute the price of the bond; CPT PV = $1,209.30

This bond is selling at a Premium.

Answer from: Quest

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

hope it

Answer from: Quest

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Microhard has issued a bond with the following characteristics:Par: $1,000Time to maturity: 15 years...

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