Assume that coupon interest payments are made semiannually and that par value is $1,000 for both bonds.
Bond A Bond B
Coupon rate 5.00% 5.00%
Time to maturity 5 years 25 years
Required return 7.37% 7.37%
a. Calculate the values of Bond A and Bond B. (Round your answers to 2 decimal places.)
b. Recalculate the bonds’ values if the required rate of return changes to 9.40%. (Round your answers to 2 decimal places.)
c. Calculate the increase or decrease in bond value based on the change in required return. (Round your answers to 2 decimal places.)

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chamberlainuket chamberlainuket · Answer 1 · 2020-04-07T07:40:20+02:00

Answer:

a.$731,09

b. $578.01

C.-$152.07

Explanation: see attached file

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abdulmajeedabiodunac abdulmajeedabiodunac · Answer 2 · 2020-04-07T18:04:57+02:00

Answer:

a. Bond A-$903.78

Bond B-$732.78

b.Bond A-$830.62

Bond B-$581.45

c.Bond A-($73.16)

Bond B-($151.33)

Explanation:

In calculating the bond values I adopted the present value formula in excel ,which is given below:

=pv(rate,nper,pmt,fv)

rate is the return on the bond also known as yield to maturity

nper is the time to maturity

pmt is the coupon payment annually which coupon rate multiplied by bond's face value

fv is the amount repayable on upon redemption which is $1000 per bond.

Find detailed calculations in the attached.