Example 2 You bought a bond that has 1,000 TL face value, 15 coupon rate Bonds maturity is 8 years What is the value of the bond if the market rate is 15 FV 1000 TL n 8 years C 15 150 150 150 150 150 150 150 150 PV 150 1 0 15 1 0 15 (1 0 15 ) 8 1000 ( 1 0 15 ) 8 PV 1000 TL If rd c , PV FV The investor (in Example 2) who bought this bond for 1,149 TL will obtain 12 annual return on the average Suppose that interest rate of the market will stay fixed to 12 next 8 years What would be the price of the bond at the end of each year

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Question: Example 2. You bought a bond that has 1,000 TL face value, 15% coupon rate. Bonds maturity is 8 years. What is the value of

Example 2. You bought a bond that has 1,000 TL face value, 15% coupon rate. Bonds maturity is 8 years. What is the value of the bond if the market rate is %15?

FV = 1000 TL

n = 8 years

C = %15

150	150	150	150
150	150	150	150

PV =150 [10.15 - 10.15₍₁₊0.15₎₈ ] + 1000(1+0.15₎8

PV = 1000 TL

If rd % = c%, PV = FV

The investor (in Example 2) who bought this bond for 1,149 TL will obtain 12% annual return on the average. Suppose that interest rate of the market will stay fixed to 12% next 8 years. What would be the price of the bond at the end of each year?

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