P 6-15 Work - P 6-15. Basic bond valuation Complex Systems...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
should the Complex Systems bond sell for today? coupon interest rate on the Complex Systems bond. and discuss. Coupon rate*par value = coupon payment 12%*$1000= $120 per payment (I am presuming in years) 10% is the yield $1000 is the par value PV is the price you pay today PV = C/(1+y) + C/[(1+y)^2] + C/[(1+y)^3] + . .. + C/[(1+y)^t] + par val/[(1+y)^t] PV = 120/1.1 + 120/1.21 + 120/1.331 +. .. + 120/4.6 + 1000/4.6 PV=$1187 you pay $1187 for the bond today b. Describe the two possible reasons why similar-risk bonds are currently earning a return below th PV = 120/1.12 + 120/1.2544 + . ..120/6.1 + 1000/6.1 PV = $1000 FV -1000 PMT (Payment Per Period) -120 N 16 Rate 12.00% PV $1,000.00 current vaule is lower wen at 12% I would choose the 10% P 6-15. Basic bond valuation Complex Systems has an outstanding issue of $1,000-parvalue bonds with a 12% a. If bonds of similar risk are currently earning a 10% rate of return, how much b. Describe the two possible reasons why the rate on similar-risk bonds is below the
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/22/2011 for the course FIN & ACC 504 & 502 taught by Professor Harper&tai during the Spring '11 term at Grand Canyon.

Page1 / 3

P 6-15 Work - P 6-15. Basic bond valuation Complex Systems...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online