a) A 10-year bond has a principal of $10000 and a coupon rate of 8%. The bond will mature in four years’ time. Therefore its holder will get the coupon interest at the end of each of the coming four years and the principal four years from now. What is the market price of this bond if the market interest rate is (i) 6% (ii) 8% and (iii) 10%? Summarize your finding.
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2006-12-13 3:43 am
回答 (2)
2006-12-19 7:51 am
✔ 最佳答案
1. for 6 %, the bond price will increase because in four years, we discount the coupons and face value(principal) in 1 to 4 yrs respectively.
coupon equals to face value times coupon rate. 10000x8%=800
therefore bond price = 800/1.06+800/1.06/1.06+800/1.06/1.06/1.06+10800/1.06/1.06/1.06/1.06
then use the equation of sum of gp to find the answer
a(1-r^n)/1-r add 10000/1.06/1.06/1.06/1.06
a is 800/1.06
r is 1/1.06
n is 4
answer 1 is $10693 same method for 2 and 3
2 is 10000
3 is $9366
ok ma?
2006-12-14 5:15 am
the original price of this bond is $10,000 x 8% = $800
if the makret interest rate is:
i) 6%, then the price will decrease to be $10,000 x 6% = $600
ii) 8%, then the price remain to be $10,000 x 8% = $800
iii) 10%, then the price will increase to be $10,000 x 10% = $1,000
if the makret interest rate is:
i) 6%, then the price will decrease to be $10,000 x 6% = $600
ii) 8%, then the price remain to be $10,000 x 8% = $800
iii) 10%, then the price will increase to be $10,000 x 10% = $1,000
參考: common sense
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