Calculate the value of a bond trading at PAR, below PAR (Discount Bond) and above PAR (Premium Bond) based on the information below. (the template spreadsheet has been attached) PAR Bond Details: A bond has 10 years until maturity with a coupon rate of 5% and an annual coupon payment of $50. Calculate the Present Value. The same bond has a future value of $1,000 (keeping the same prior assumptions (10 years until maturity, 5% coupon rate), however, excluding the annual coupon payment). Calculate the Present Value. *When you add the present value for both scenarios the value of the bond will be $1,000. Discount Bond Details: A bond has 9 years until maturity with a coupon rate of 7% and an annual coupon payment of $50. Calculate the Present Value. The same bond has a future value of $1,000 (keeping the same prior assumptions (9 years until maturity, 7% coupon rate), however, excluding the annual coupon payment). Calculate the Present Value. *When you add the present value for both scenarios the value of the bond will be below $1,000. Premium Bond Details: A bond has 9 years until maturity with a coupon rate of 4% and an annual coupon payment of $50. Calculate the Present Value. The same bond has a future value of $1,000 (keeping the same prior assumptions (9 years until maturity, 4% coupon rate), however, excluding the annual coupon payment). Calculate the Present Value. *When you add the present value for both scenarios the value of the bond will be above $1,000. Calculate the YTM based on the information provided and explain the difference between the Yield to Maturity rate and the original coupon rate. YTM Bond Details: A bond is currently selling for $850 with 15 years until it matures. The bond has a current coupon rate of 6% and makes payments semi-annually. You purchase the bond today 1/1/2023 as your settlement date and you are interested in knowing what the YTM will be. **Note, when calculating the YTM the bond price (% of par) and face value (% of par) will not be percentages, please use numbers for their respective section. The Yield Calculation is already built into excel, all you have to do is type is =yield.
- Calculate the value of a bond trading at PAR, below PAR (Discount
Bond) and above PAR (Premium Bond) based on the information
below. (the template spreadsheet has been attached)
PAR Bond Details:
A bond has 10 years until maturity with a coupon rate of 5% and an
annual coupon payment of $50. Calculate the
The same bond has a
assumptions (10 years until maturity, 5% coupon rate), however,
excluding the annual coupon payment). Calculate the Present Value.
*When you add the present value for both scenarios the value of the
bond will be $1,000.
Discount Bond Details:
A bond has 9 years until maturity with a coupon rate of 7% and an
annual coupon payment of $50. Calculate the Present Value.
The same bond has a future value of $1,000 (keeping the same prior
assumptions (9 years until maturity, 7% coupon rate), however,
excluding the annual coupon payment). Calculate the Present Value.
*When you add the present value for both scenarios the value of the
bond will be below $1,000.
Premium Bond Details:
A bond has 9 years until maturity with a coupon rate of 4% and an
annual coupon payment of $50. Calculate the Present Value.
The same bond has a future value of $1,000 (keeping the same prior
assumptions (9 years until maturity, 4% coupon rate), however,
excluding the annual coupon payment). Calculate the Present Value.
*When you add the present value for both scenarios the value of the
bond will be above $1,000.
- Calculate the YTM based on the information provided and explain
the difference between the Yield to Maturity rate and the original
coupon rate.
YTM Bond Details:
A bond is currently selling for $850 with 15 years until it matures.
The bond has a current coupon rate of 6% and makes payments
semi-annually. You purchase the bond today 1/1/2023 as your
settlement date and you are interested in knowing what the YTM
will be. **Note, when calculating the YTM the
and face value (% of par) will not be percentages, please use
numbers for their respective section. The Yield Calculation is already
built into excel, all you have to do is type is =yield.
- Stock Valuation:
Choose a stock that currently pays a dividend (you can find this on
yahoo finance - called Forward Dividend & Yield. Calculate the
stock valuation based on the Constant Growth Formula found on
page 273 example 9.2 of the textbook. Do you agree with the
valuation in comparison to where the stock is currently trading?
Why or Why not?
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