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ABC Company Bonds are trading on the open market. Currently the market yield rate or YTM is 6.5%. The coupon rate on the ABC Bonds is at 6.25%. These bonds mature in 20 years. What would be the price quote of these bonds

Respuesta :

Answer:

The price quote of the bond is $972.45

Explanation:

The price of the bond can be computed using the pv value formula in excel which is =-pv(rate,nper,pmt,fv)

rate is the yield to maturity of 6.5%

nper is the number of coupon interest payment of the bond which is 20

pmt is the annual interest payment of the bond i.e $1000*6.25%=$62.5

The fv is the default face value of a bond at $1000

=-pv(6.5%,20,62.5,1000)

pv=$972.45

The bonds would have a  price quote of $972.45

Obviously the bonds would be issued at discount as yield is higher than coupon rate

The price quote of these bonds should be $972.

Given that,

  • Currently the market yield rate or YTM is 6.5%.
  • The coupon rate on the ABC Bonds is at 6.25%.
  • These bonds mature in 20 years.
  • Here we assume the future value be $1,000.
  • The coupon payment is $62.50.

Based on the above information, the calculation is as follows:

= PV(RATE,NPER,PMT,FV,TYPE)

The above formula should be applied in the excel.

Learn more: brainly.com/question/17429689

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