Question: How to solve the question (b) and (c) about the yield and I don't know how to calculator the future value of interest payment. suppose

 How to solve the question (b) and (c) about the yieldHow to solve the question (b) and (c) about the yield and I don't know how to calculator the future value of interest payment.

suppose you purchase a six-year, 8 percent coupon bond (paid annually) that is priced to yield 9 percent. The face value of the bond is $1,000. a. show that the duration of this bond is equal to five years. Six-year Bond: Par value $1,000 Coupon rate-8% Annual payments Maturity 6 years CE, 80 0.9174. 73.39 73.39 2 80 0.8417 67.33 134.67 80 0.7722 61.77 185.32 80 0.7084 56.67 226.70 5 80 0.6499 51.99 259.97 6 1,080 0.5963 643.9 3,863.8 955.14 4,743.87 Duration-$4,743.87/955.14-4 97 5 years b. show that if interest rates rise to 10 percent within the next year and your investment horizon is five years from today, you will still earn a 9 percent yield on your investment. Value of bond at end of year five: Pv ($80 $1,000) 1.10 $981.82 Future value of interest payments at end of year five: $80Fvn 4. 10% $488.41 Future value of all cash flows at n-5: Coupon interest payments over five years S400.00 Interest on interest at 10 percent 88.41 Value of bond at end of year five $981.82 Total future value of investment Yield on purchase of asset at s955.14 $us47023xPyo i 9.00924% c. Show that a 9 percent yield also will be earned if interest rates fall next year to 8 percent. Value of bond at end ofyear five: PV (s80 $1,000W1.08 $1,000 Future value of interest payments at end of year five: s80xEYa-s, S469.33 Future value of all cash flows at n 5: Coupon interest payments over five years S400.00 Interest on interest at 8 percent 69.33 Value of bond at end of year five $1,000.00 Total future value of investment Yield on purchase of asset at $955.14-$1.46933sPyo i-m6- i-8.99596 percent. 13R: 4,558

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