SOLUTION: Bond XYZ is a $1,000, 4% semi-annual coupon bond issued today on 1 Jan 2023, maturing on 31 December 2032. Coupons are paid on every 30 June and 31 December.
(a) If you bought Bon
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-> SOLUTION: Bond XYZ is a $1,000, 4% semi-annual coupon bond issued today on 1 Jan 2023, maturing on 31 December 2032. Coupons are paid on every 30 June and 31 December.
(a) If you bought Bon
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Question 1201752: Bond XYZ is a $1,000, 4% semi-annual coupon bond issued today on 1 Jan 2023, maturing on 31 December 2032. Coupons are paid on every 30 June and 31 December.
(a) If you bought Bond XYZ today at a yield (YTM) of 3% compounded semiannually, what’s your purchase price? Did you buy the bond at a premium, par or discount? (4 marks) Answer by Theo(13342) (Show Source):
the results are shown below at 4% per year compounded semi-annually.
the results are shown below at 3% per year compounded semi-annually.
what you are doikng is taking the present value of the cash flows at the interest rate indicated for the remaining time periods of the loan.
i duplicated these results in excel as shown below:
it the annual coupon rate is the same as the yield to maturity rate, then the present value of the bond will be equal to the face of the bond.
the bond is being sold at part
if the annual coupon rate is more than the yield to maturity rate, then the present value of the bond will be higher than the face of the bond.
the bond is being sold at a premium.
if the annual coupon rate is less than the yield to maturity rate, then the present value of the bond will be lower than the face of the bond.
the bond is being sold at a discount.
here's a reference on the bond priciing formula.
i checked their results against the bond pricing calculator i gave you above and they match. https://www.educba.com/bond-pricing-formula/
