How do i calculate bond valuation? and New Bond, locked and loaded

How do i calculate bond valuation?

Bond X is a premium bond making annual payments. The bond pays an 13 per cent coupon, has a YTM of 6 per cent, and has 13 years to maturity. Bond Y is a discount bond making annual payments. This bond pays a 7 per cent coupon, has a YTM of 8 per cent, and also has 13 years to maturity. The par value of the bonds is 1,000.

If interest rates remain unchanged, what do you expect the price of these bonds to be eight years from now? (Round your answers to two decimal places.


Bond best answer:

Answer by Mohammad
Working calculations are as under. Finer calculations can be done by using discounting tables.

Bond X:

Present Price = (YTM/Coupen Rate)* = (6/13)*1000(PV) = 461.54

Difference between Par value and Current Price = 1000- 461.54 = 538.46
Difference per annum = 538.46/13 = 41.42
Difference for 8 years = 41.42*8= 331.36
Price after 8 years = 461.54+331.36 = 792.9


Bond Y:

Present Price = (Coupen Rate/YTM)* = (8/7)*1000(PV) = 1142.86

Difference between Current Price and Par value = 1142.86-1000 = 142.86
Difference per annum = 142.86/13 = 10.99
Difference for 8 years = 10.99*8 = 87.91
Price after 8 years = 1142.86-87.91=1054.95

Bond

New Bond, locked and loaded


Image by Dunechaser
The new James Bond with BrickArms M4 Carbine and PPK.

---

Orignal From: How do i calculate bond valuation? and New Bond, locked and loaded