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  • 10 Yr, 10% Bond: Current Interest Rate Is 10%

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    Sehee Nam
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    This document contains examples of calculating the present value of a 10-year, 10% coupon bond at different interest rates (10%, 12%, 8%). At a 10% interest rate, the present value of the coupons is $614.46 and the present value of the $1000 par value is $385.54, totaling $1000. At a 12% rate, the present values are $565.02 and $321.97 respectively, totaling $886.99. At an 8% rate, the present values are $671 and $463.19 respectively, totaling $1134.19.

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    This document contains examples of calculating the present value of a 10-year, 10% coupon bond at different interest rates (10%, 12%, 8%). At a 10% interest rate, the present value of the coupons is $614.46 and the present value of the $1000 par value is $385.54, totaling $1000. At a 12% rate, the present values are $565.02 and $321.97 respectively, totaling $886.99. At an 8% rate, the present values are $671 and $463.19 respectively, totaling $1134.19.

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
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    7 views8 pages

    10 Yr, 10% Bond: Current Interest Rate Is 10%

    Uploaded by

    Sehee Nam
    This document contains examples of calculating the present value of a 10-year, 10% coupon bond at different interest rates (10%, 12%, 8%). At a 10% interest rate, the present value of the coupons is $614.46 and the present value of the $1000 par value is $385.54, totaling $1000. At a 12% rate, the present values are $565.02 and $321.97 respectively, totaling $886.99. At an 8% rate, the present values are $671 and $463.19 respectively, totaling $1134.19.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 8

    10 yr, 10% bond

    Current interest rate is 10%

    $100

    $100

    $100

    $100

    $100

    $100

    $100

    $100

    $100

    10

    $100
    $1000

    10 yr, 10% bond


    Current interest rate is 10%

    $100

    $100

    $100

    $100

    $100

    $100

    $100

    $100

    $100

    10

    $100
    $1000

    Present Value of the Coupons


    Present Value of the $1000, paid in 10 years

    PMT
    N
    I
    COMP

    =100
    = 10
    = 10%
    = PV
    = $614.46

    FV
    N
    I
    COMP

    =1000
    = 10
    = 10%
    = PV
    = $385.54

    $614.46 + $385.54 = $1000

    10 yr, 10% bond


    Current interest rate is 12%

    $100

    $100

    $100

    $100

    $100

    $100

    $100

    $100

    $100

    10

    $100
    $1000

    Present Value of the Coupons


    Present Value of the $1000, paid in 10 years

    PMT
    N
    I
    COMP

    =100
    = 10
    = 12%
    = PV
    = $565.02

    FV
    N
    I
    COMP

    =1000
    = 10
    = 12%
    = PV
    = $321.97

    $565.02 + $321.97 = $886.99

    10 yr, 10% bond


    Current interest rate is 8%

    $100

    $100

    $100

    $100

    $100

    $100

    $100

    $100

    $100

    10

    $100
    $1000

    Present Value of the Coupons


    Present Value of the $1000, paid in 10 years

    PMT
    N
    I
    COMP

    =100
    = 10
    = 8%
    = PV
    = $671.00

    FV
    N
    I
    COMP

    =1000
    = 10
    = 8%
    = PV
    = $463.19

    $671.00 + $463.19 = $1134.19

    LO2

    The Bond-Pricing Equation

    1
    1
    t

    (1 r)
    Bond Value C
    r

    F

    t
    (1 r)

    LO1

    Bond Definitions

    Bond
    Par value (face value)
    Coupon rate
    Coupon payment
    Maturity date
    Yield or Yield to maturity
    the market interest rate that equates a bonds
    present value of interest payments and
    principal repayment with its price

    Bond Market
    $80 Trillion /
    year
    Stock Market
    $40 Trillion /
    year

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