Intro You've collected the following information about a corporate bond: Face value 1,000 Years to maturity 3 Coupon rate Yield to maturity 18 0.028 0.043 The yield to maturity is the market interest rate for bonds of similar risk and maturity. It is Jan. 2, 2014, and interest payments occur on Jan. 1 and July 1 of each year. Part 1 18 Attempt 2/10 for 10 pts. What is the amount of each coupon payment? Correct Coupon payments are interest payments. By convention, corporate bonds pay interest twice a year in the U.S.A. Annual coupon = Coupon rate * Face value = 0.028 * 1,000 = 28 Each coupon = 1/2 * Annual coupon = 14 Part 2 IB Attempt 1/10 for 10 pts. Copy the table above to Excel and add two rows, one showing the number of periods from now and the second one the cash flow from the bond at each time. What is the cash flow in the last period? Correct v AJ AK AL | A Face value 2 Years to maturity 3 Coupon rate 4 Yield to maturity B C D ... 1,000 18 Periods 36 =B2*2 0.028 Coupon 14 =B1*B3/2 0.043 6 Periods from now 7 Cash flow 1 1 14 2 3 14 14 ... 35 36 Formula 14 1,014 =B1+$D3 At maturity (in the last period), the bond makes the last coupon payment and pays back the principal, or face value of the bond. 18 | Attempt 4/10 for 10 pts. Part 3 Using the appropriate discount rate, what is the present value of the cash flow in the last period? Add another row to your spreadsheet. No decimals Submit Part 4 IB | Attempt 1/10 for 10 pts. What is the sum of present values? This is the fair value of the bond. No decimals Submit