Homework SourseBetsy inherited 100 US Treasury bonds with 20 years remianin
Betsy inherited 100 U.S. Treasury bonds with 20 years remianing to maturity. The bonds pay interest of $40 at the end of each year, and each has a face value of $1000. How much would the bonds be worth today if the current market rate of interest is 3.7%?
Solution
Using financial calculator BA II Plus - Input details:
#
I/Y = Rate or yield / frequency of coupon in a year = 3.7/1 =
3.70
PMT = Payment = Coupon / frequency of coupon = 40/1 =
-$40.00
N = Total number of periods = Years x frequency of coupon = 20 x 1 =
20
FV = Future Value =
-$1,000.00
CPT > PV = Bond Value =
$1,041.88
Total number of bonds are 100 hence, total bond value = $1,041.88 x 100 = $104,188
| Using financial calculator BA II Plus - Input details: | # |
| I/Y = Rate or yield / frequency of coupon in a year = 3.7/1 = | 3.70 |
| PMT = Payment = Coupon / frequency of coupon = 40/1 = | -$40.00 |
| N = Total number of periods = Years x frequency of coupon = 20 x 1 = | 20 |
| FV = Future Value = | -$1,000.00 |
| CPT > PV = Bond Value = | $1,041.88 |
