Please complete the attached worksheet by providing a response to all of the questions.
Please answer the following time value of money questions below. Charting out each of the problem elements (ex. N = 10, PV = 500, etc.) will not only help you in answering the questions but will also assist me in following your calculations.
1. Calculate the value of a bond with a coupon rate of 7.5% and market interest rate of 9% that matures in 12 years.
2. What is the value of the bond in question 1 if the market interest rate decreases to 6.5%? What would you call this kind of bond?
3. What is the value of the bond in question 1 if the market interest rate increases to 11%? What would you call this kind of bond?
4. You just purchased an outstanding 20-year bond with a par value of $1,000 for $1,095. Its annual coupon is $60. Calculate the bond’s yield to maturity.
5. You just purchased an outstanding 20-year bond with a par value of $1,000 for $1,095. Its annual coupon payment is $60. What is the yield to call if the bond is callable in 5 years at a price of $1,060?
6. You have been offered the opportunity to purchase a non-callable bond with a $100 annual coupon at a market rate of 7% that matures in 15 years. What is the most you should pay for this bond?
7. What is the current price of a bond with an 8% semiannual coupon at a market rate of 6% that matures in 10 years?
8. What is the yield to maturity of a bond with a 7% semiannual coupon, a current price of $1,200, that matures in 15 years?
9. Last year you purchased a bond with a 6% semiannual coupon with a market rate of 8% that matures in 20 years. Today, 1 year later, the market rate has increased to 10%. What is the percentage change in bond value from last year to today?
10. Two years ago, you purchased a bond with a 6% semiannual coupon with a market rate of 8% that matures in 20 years. Today, the market rate has decreased to 6.5%. What is the percentage change in bond value from two years ago to today?
