Help finding bond prices please!?

Bond X is a premium bond making annual payments. The bond has a coupon rate of 9 percent, a YTM of 7 percent, and has 13 years to maturity. Bond Y is a discount bond making annual payments. This bond has a coupon rate of 7 percent, a YTM of 9 percent, and also has 13 years to maturity. Assume the interest rates remain unchanged.

What are the prices of these bonds today?

In 1 year?

3 years?

8 years?

12 years?

13 years?

2 Answers

Relevance
  • 1 month ago

    Bond price = FV / (1 + i)^n + Pmt x (1 - 1 / (1 + i)^n) / i

    Today

    Bond X = 1000/(1+7%)^13+1000*9%*(1-1/(1+7%)^13)/7% = 1,167.15

    Bond Y =  1000/(1+9%)^13+1000*7%*(1-1/(1+9%)^13)/9% =  850.26  

    Year 1

    13-1 = 12 years left

    Bond X = 1000/(1+7%)^12+1000*9%*(1-1/(1+7%)^12)/7% =  1,158.85

    Bond Y = 1000/(1+9%)^12+1000*7%*(1-1/(1+9%)^12)/9% = 856.79  

    ...

    Year 13

    13-13 = 0 year left 

    Bond X = 1000/(1+7%)^0+1000*9%*(1-1/(1+7%)^0)/7% = 1,000

    Bond Y = 1000/(1+9%)^0+1000*7%*(1-1/(1+9%)^0)/9% =  1,000

  • Don G
    Lv 7
    1 month ago

    Assume both are $1,000 Bonds.

    Bond X - Price today $1,167; in 8 yrs $1,082; in 13 yrs $1,000

    Bond Y - Price today $850; in 8 yrs $922; in 13 yrs $1,000

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