Bond Valuation Assignment

Simon Erick
29121289

P6-19

a.
Bond Input Value

1 N=5, I=8%, PMT = $110, FV = %100 $1119.78

2 N=5, I=11%, PMT = $110, FV = %100 $1000

3 N=5, I=14%, PMT = $110, FV = %100 $897.01

b.
Bond Input Value

1 N=15, I=8%, PMT = $110, FV = %100 $1256.78

2 N=15, I=11%, PMT = $110, FV = %100 $1000

3 N=15, I=14%, PMT = $110, FV = %100 $815.73

c.
Value
Required Return Bond A Bond B
8% $1,119.78 $1,256.78
11% $1,000.00 $1,000.00
14% $897.01 $815.73
The longer time to maturity, the more responsive the market value to changing required
returns.

d. If Lynn want to minimize the interest rate risk, she must choose Bond A because it has shorter
maturity.