Calculate the value of each of the bonds shown in the follow

Calculate the value of each of the bonds shown in the following? table, all of which pay interest semiannual

What are the values of bond A $?, Bond B and Bond C?

Bond   Par Value   Coupon interest rate   Year to maturity   Required stated annual return
A   1,000 9% 9 8%
B   500 11 % 15 11%
C   100 13% 4 12

Solution

bond A: FV = 1000, PMT = 45, N = 18, rate = 4%

use PV function in Excel

value of A = 1063.30

bond B: since the coupon rate and annual rate is same the bond will be sold at par

value of B = 500

bond C: FV = 100, PMT = 6.5, N = 8, rate = 6%

use PV function in Excel

value of C = 103.10