The Government of Colombia plans to issue a bond with a face value of $10,000,000. Given that the Banco de la Repblica has just raised interest rates to 5%, the Ministry of Finance considers that in order to make the bond attractive, it must pay a fixed coupon rate of at least 6.5% EA (with annual payments).The bond will have a maturity of 10 years and it is believed that the market opportunity interest rate today is also of 5%, and that it will remain constant during the 10 years.Assume that the government will issue different types of bonds, all with a nominal value of 10 million and a coupon rate of 7%, but that they will have maturities of 1, 2, 5, 10 and 20 years. Assume that these bonds will also face different market rates 4%, 5%, 6%, 6.5%, 7%, 8%, 9% and 10%. Build a table in Excel where the prices of all possible permutations are calculated.

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To calculate the prices of all possible permutations of bonds with different maturities and market r... View the full answer