Yan Yan Corp. has a $3,000 par value bond outstanding with a coupon rate of 5.2 percent paid semiannually and 25 years to maturi
ty. The yield to maturity on this bond is 4.8 percent. What is the price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
1 answer:
Answer:
$3,173.63
Explanation:
For computing the price of the bond we need to apply the present value i.e to be shown in the attachment
Given that,
Future value = $3,000
Rate of interest = 4.8% ÷ 2 = 2.4%
NPER = 25 years × 2 = 50 years
PMT = $3,000 × 5.2% ÷ 2 = $78
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after applying the above formula, the price of the bond is $3,713.63
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Answer:
(i) $133.12
(ii) $297.6
(iii) $300.8
(iv) $301.6
Explanation:
From the compounding formula;
Future value = Present value
where r is the rate, m is the number of payment per year, and n is the number of years.
Interest = future value - present value
Given that present value = $800, r = 8%, n = 4 years.
(i) annually,
m = 1, so that;
Future value = 800
= $933.12
Interest = $933.12 - $800
= $133.12
(ii) quarterly,
m = 3, so that;
Future value = 800
= 800(1.372)
= $1097.6
Interest = $1097.6 - $800
= $297.6
(iii) monthly,
m = 12, so that;
Future value = 800
= 800(1.376)
= $1100.8
Interest = $1100.8 - $800
= $300.8
(iv) weekly,
m = 54, so that;
Future value = 800
= 800(1.377)
= $1101.6
Interest = $1101.6 - $800
= $301.6