Question

A bond with a par value of $1000 has a coupon rate of 7 percent and matures in 15 years. Using a spreadsheet program, graph its price versus different yields to maturity, ranging from 1 percent to 20 percent. Is the relationship between price and yield linear? Why?
Semi-annual coupons = $35; number of periods = 15 x 2 = 30
A spreadsheet can be used to find the value of a bond with yields to maturity in different cells, ranging from 1 percent to 20 percent. The Chart Wizard in Excel can be used to plot the bond prices and yields. The relationship between price and yield to maturity is not linear as the present value equations require the use of exponents.
The present value decreases more sharply the higher the yield we use for discounting.


$1.99
Sales2
Views171
Comments0
  • CreatedMarch 27, 2015
  • Files Included
Post your question
5000