How to calculate the bond price which has a interest rate changing at the end of the investment period? and Paseo/Bond Bridges

How to calculate the bond price which has a interest rate changing at the end of the investment period?

An investment banker purchased 5 year $ 200 million of 10% bonds in an IPO. The banker plans to sell the bonds into the market next morning. Interest rates are falling rapidly and the banker fears these rates will fall overnight. This bonds pay annually. The banker was right and interest rates fell 50 basis points overnight. At what price will the bonds sell?


Bond best answer:

Answer by JoeyV
1) The banker "fears" interest rates are falling? The banker owns a fixed interest bond so he wants interest rates to fall.

2) In Excel, =PRICE(DATE(2011,1,1), DATE(2016,1,1), 0.1, 0.095, 100,1) = 101.92 as the price of the bonds. Thus, the bonds will sell for $ 203,839,700

Bond

Paseo/Bond Bridges


Image by CoolValley
The old making way for the new.

The Paseo bridge is being replaced with the Bond bridge.

The Paseo bridge has been around for about 50 years or so. The Bond bridge is scheduled for a 2011 opening.

These bridges carry north and southbound federal highways I-29 and I-35 across the Missouri river at Kansas City, Missouri.

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