SOLUTION: Commercial Bond 1 in Market X: The other features of the Bond are as follows: Par value: $2000 Coupon rate: 10% Coupon rate compounding interval: semi-annual Current market

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Question 1122777: Commercial Bond 1 in Market X:
The other features of the Bond are as follows:
Par value: $2000
Coupon rate: 10%
Coupon rate compounding interval: semi-annual
Current market rate of similar Bond: 11%
Year to maturity: 10 years
Commercial Bond 2 in Market Y
The other features of the Bond are as follows:
Par value: $2000
Coupon rate: 8%
Coupon rate compounding interval: monthly
Current market rate of similar Bond: 7%
Year to maturity: 10 years
(a) A recent University graduate John has joined your team. You have asked John to calculate the present value of both Commercial Bond 1 and 2. John submitted his calculations as follows: Present value of Commercial Bond 1 $1882.22 and 2 $2140.47. Are John’s calculations correct? Where has he gone wrong?
Answer by ikleyn(52795) About Me  (Show Source):
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