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BOND VALUATION An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond...

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Finance

BOND VALUATION

An investor has two bonds in her portfolio, Bond C and Bond Z.Each bond matures in 4 years, has a face value of $1,000, and has ayield to maturity of 9.5%. Bond C pays a 10% annual coupon, whileBond Z is a zero coupon bond.

  1. Assuming that the yield to maturity of each bond remains at9.5% over the next 4 years, calculate the price of the bonds ateach of the following years to maturity. Round your answer to thenearest cent.
    Years to MaturityPrice of Bond CPrice of Bond Z
    4$$
    3
    2
    1
    0

Answer & Explanation Solved by verified expert
3.9 Ratings (715 Votes)
Price of bond C for 4 years Information provided Par value future value 1000 Time 4 years Yield to maturity 95 Coupon rate 10 Coupon payment 0101000 100 The price of the bond is computed by calculating the present value The below has to be entered to compute the present value FV 1000 N 4 IY 95 PMT 100 Press the CPT key and PV to compute the present value The value obtained is 101602 Therefore the price of the bond is 101602 Price of bond C for 3 years Information provided Par value future value 1000 Time 3 years Yield to maturity 95 Coupon rate 10 Coupon payment 0101000 100 The price of the bond is computed by calculating the present value The below has to be entered to compute the present value FV 1000 N 3 IY 95 PMT 100 Press the CPT key and PV to compute the present value The value obtained is    See Answer
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Transcribed Image Text

BOND VALUATIONAn investor has two bonds in her portfolio, Bond C and Bond Z.Each bond matures in 4 years, has a face value of $1,000, and has ayield to maturity of 9.5%. Bond C pays a 10% annual coupon, whileBond Z is a zero coupon bond.Assuming that the yield to maturity of each bond remains at9.5% over the next 4 years, calculate the price of the bonds ateach of the following years to maturity. Round your answer to thenearest cent.Years to MaturityPrice of Bond CPrice of Bond Z4$$3210

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