In year 1, the Par Value bond is $1955, the annual coupon rate is 8.5%, and the
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In year 1, the Par Value bond is $1955, the annual coupon rate is 8.5%, and the bond is currently trading at $1656.81. In year 2, the 6.8% annual coupon and Par Value bond is $2100 to mature in 6 years, and similar bonds are currently yielding 7.5%.In year 3, the same parameters as year 2, only similar bonds are yielding 8.9%. For year 4, it is a $3176 par value bond maturing in 4 years. Similar bonds are yielding 10.2%.
- Provide explanations and your calculations for each of the years’ responses. (Using Excel)
- Year 1: What is the current market yield for your bond with the indicated annual coupon rate and maturity?
- Year 2: What is the Present Value of the annual coupon, par value bond to maturity?
- Year 3: What is the Present Value of a bond using the same data you are given in Year 2, but with the similar bond yield provided?
- Year 4: What is the Present Value of the zero-coupon bond to maturity?
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