Bond X is a premium bond making semi annual payments. The bond has a coupon of 7.5%, or go to maturity of 6%, and 13 years to maturity. Bond Y is a discount bond making semi annual payments. The bond has a coupon rate of 6%, a yield to maturity of 7.5%, and also 13 years to maturity. What are the prices of these bonds today assuming both bonds have $1000 par value? If the interest rate remains unchanged, what do you expect the price of these bonds to be in one year? In three years? In eight years? In 12 years? In 13 years? What's going on here? Illustrate your answer by graphing the bond prices versus time to maturity. Excel would be good. Thanks
Bond X is a premium bond making semi annual payments. The bond has a coupon of 7.5%, or go to maturity of 6%, and 13 years to maturity. Bond Y is a discount bond making semi annual payments. The bond has a coupon rate of 6%, a yield to maturity of 7.5%, and also 13 years to maturity. What are the prices of these bonds today assuming both bonds have $1000 par value? If the interest rate remains unchanged, what do you expect the price of these bonds to be in one year? In three years? In eight years? In 12 years? In 13 years? What's going on here? Illustrate your answer by graphing the bond prices versus time to maturity. Excel would be good. Thanks
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter5: Bonds, Bond Valuation, And Interest Rates
Section: Chapter Questions
Problem 5MC: What would be the value of the bond described in Part d if, just after it had been issued, the...
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Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Question
- Bond X is a premium bond making semi annual payments. The bond has a coupon of 7.5%, or go to maturity of 6%, and 13 years to maturity. Bond Y is a discount bond making semi annual payments. The bond has a coupon rate of 6%, a yield to maturity of 7.5%, and also 13 years to maturity. What are the prices of these bonds today assuming both bonds have $1000 par value? If the interest rate remains unchanged, what do you expect the price of these bonds to be in one year? In three years? In eight years? In 12 years? In 13 years? What's going on here? Illustrate your answer by graphing the
bond prices versus time to maturity.
Excel would be good. Thanks
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