Respuesta :
Answer:
Price of x bond = $1158.02
Price of y bond = $1000
Explanation:
given data
bonds value = $1,000 par value
x bond
coupon rate = 12 percent = 0.12
YTM = 10 percent = 0.10 = 0.05 semi annual
maturity = 16 years = 32 semi annual
y bond
coupon rate = 10 percent = 0.10
YTM = 12 percent = 0.12 = 0.06 semi annual
maturity = 16 years = 32 semi annual
solution
For x bond
first we get here semi annual coupon payment that is express as
semi annual payment = bonds value × coupon rate × time period .........1
semi annual payment = $1000 × 0.12 × 0.5
semi annual payment = $60
and
Price of bond will be
Price of bond = semi annual payment × [tex]\frac{1-(1+r)^{-time} }{rate} + \frac{maturity}{(1+rate)^{time}}[/tex] ..........................2
put here value and we get
Price of bond = 60 × [tex]\frac{1-(1+0.05)^{-32} }{0.05} + \frac{1000}{(1+0.05)^{32}}[/tex]
Price of bond = $1158.02
and
For y bond
semi annual payment = bonds value × coupon rate × time period .........3
semi annual payment = $1000 × 0.10 × 0.5
semi annual payment = $50
and
Price of bond will be
Price of bond = semi annual payment × [tex]\frac{1-(1+r)^{-time} }{rate} + \frac{maturity}{(1+rate)^{time}}[/tex] ..........................4
put here value and we get
Price of bond = 50 × [tex]\frac{1-(1+0.06)^{-32} }{0.06} + \frac{1000}{(1+0.06)^{32}}[/tex]
Price of bond = $1000
