[EXCEL] Bond price: Pierre Dupont just received a cash gift from his grandfather. He plans to invest in a five-year bond issued by Venice Corp. that pays an annual coupon rate of 5.5 percent. If the current market rate is 7.25 percent, what is the maximum amount Pierre should be willing to pay for this bond? Please use Excel.

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[EXCEL] Bond price: Pierre Dupont just received a cash gift from his grandfather. He plans to invest in a five-year bond issued by Venice Corp. that pays an annual coupon rate of 5.5 percent. If the current market rate is 7.25 percent, what is the maximum amount Pierre should be willing to pay for this bond? Please use Excel.

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Step 1

The question is based on the concept to calculate market value of a bond, using following function in excel ,

Rate = Current market rate =7.25%

nper = number of payment / maturity = 5

Pmt = Periodic payment (5.5%) = \$5.5

Fv= maturity value = \$ 100

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