Finance Help
| Bond Valuation and Yield |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| A bond has a par value of $1,000, pays $50 semiannually and has a maturity of 10 years. |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| If the bond earns 12% per year, what is the price of the bond? |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Rate |
12% |
|
|
|
|
|
|
|
|
|
|
|
|
| Nper |
10 |
|
|
|
|
|
|
|
|
|
|
|
|
| PMT |
|
|
|
|
|
|
|
|
|
|
|
|
|
| FV |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Type |
|
|
|
|
|
|
|
|
|
|
|
|
|
| PV |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| What is the yield to maturity for the bond? |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nper |
|
|
|
|
|
|
|
|
|
|
|
|
|
| PMT |
|
|
|
|
|
|
|
|
|
|
|
|
|
| PV |
|
|
|
|
|
|
|
|
|
|
|
|
|
| FV |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Type |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| What would be the bond’s price if the rate earned declined to 8% per year? |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nper |
|
|
|
|
|
|
|
|
|
|
|
|
|
| PMT |
|
|
|
|
|
|
|
|
|
|
|
|
|
| FV |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Type |
|
|
|
|
|
|
|
|
|
|
|
|
|
| PV |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| If the maturity period is reduced to 5 years and the required rate of return is 8%, what would be the price of the bond? |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nper |
|
|
|
|
|
|
|
|
|
|
|
|
|
| PMT |
|
|
|
|
|
|
|
|
|
|
|
|
|
| FV |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Type |
|
|
|
|
|
|
|
|
|
|
|
|
|
| PV |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| What is the yield to maturity for the bond when the maturity is 5 years and the required rate of return is 8%? |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nper |
|
|
|
|
|
|
|
|
|
|
|
|
|
| PMT |
|
|
|
|
|
|
|
|
|
|
|
|
|
| PV |
|
|
|
|
|
|
|
|
|
|
|
|
|
| FV |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Type |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| What generalizations about bond prices, interest rates and maturity periods can be made based on the calculations made above? |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
