Ask Question
BusinessBusiness
15 April, 04:52

4. Valuing semiannual coupon bonds Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles, whereas the amount of cash flow decreases by half. Using the values of cash flows and number of periods, the valuation model is adjusted accordingly. Assume that a $1,000,000 par value, semiannual coupon US Treasury note with three years to maturity has a coupon rate of 3%. The yield to maturity (YTM) of the bond is 7.70%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note: $876,205.93 $744,775.04 $1,051,447.12 $552,009.74 Based on your calculations and understanding of semiannual coupon bonds, complete the following statement: The T-note described in this problem is selling at a.

+5
Answers (1)
  1. T
    15 April, 08:34
    0
    T-note described in this problem is selling at a price of $876,205.93

    Explanation:

    The price of the bond can be computed using pv formula in excel as stated thus:

    =-pv (rate, nper, pmt, fv)

    rate is the semiannual yield which is the annual yield of 7.70% divided by 2

    nper is the number of coupons payable by the bond over its three years' tenure given that coupon is paid twice a year i. e 3*2=6

    pmt is the semiannual coupon payment=$1,000,000*3%*6/12=$15000

    fv is the face value of $1,000,000

    =-pv (7.70%/2,6,15000,1000000) = $876,205.93
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “4. Valuing semiannual coupon bonds Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Allison has returned to school after five years out of the work force. She is taking one course at the local university for a cost of $1,500.
Answers (1)
Which of the following represents the types of data commonly found in the Marketing department? a. Promotional data b. Payroll data c. Tax data d. Employee data
Answers (1)
Harold has a balance of $2200 on a credit card with an APR of 31.3%, compounded monthly. About how much will he save in interest over the course of a year if he transfers his balance to a credit card with an APR of 19.
Answers (1)
The broker working with the buyer in writing the Contract to Buy and Sell Real Estate must disclose which of the following?1. The broker is an agent of the buyer2. The broker is a transaction broker3.
Answers (1)
Page 529 16.3. what is supply-side fiscal policy? identify each policy action as being focused on the demand side, the supply side, or both. drag each item on the left to its matching item on the right.
Answers (1)
New Questions in Business
25 suppose that 10,000 customers in a retailer's customer database are categorized by three customer types: 3,500 prospective buyers, 4,500 first time buyers, and 2,000 repeat (loyal) buyers. a sample of 1,000 customers is needed.
Answers (1)
Identify the simplifying assumptions usually made in net present value analysis. (You may select more than one answer.
Answers (1)
The state of Wyoming has just passed a law requiring all cars entering the state to be equipped with side air bags. The Wyoming requirement: a. is constitutional because it does not apply to commerce. b.
Answers (1)
A monetarist would argue that a. prices are inflexible. b. wages are inflexible. c. changes in M in the short run can cause Real GDP to fall. d. large changes in M could be offset by changes in V and not cause changes in P.
Answers (1)
Stan has an employee, barbara, who is critical to stan's company. he knows that replacing her will be costly and difficult so he pays her a salary that is 10% higher than the market salary for qualified employees like barbara.
Answers (1)
Home » Business » 4. Valuing semiannual coupon bonds Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles, whereas the amount of cash flow decreases by half.
Sign In
Ask Question
Menu
Subjects