Question
You are considering the following bonds to include in your portfolio: Bond 1 Bond 2 Bond 3 Price $900.00 $1,100.00 $1,000.00 Face Value $1,000.00 $1,000.00
- You are considering the following bonds to include in your portfolio:
|
| Bond 1 | Bond 2 | Bond 3 |
| Price | $900.00 | $1,100.00 | $1,000.00 |
| Face Value | $1,000.00 | $1,000.00 | $1,000.00 |
| Coupon Rate | 7.00% | 10.00% | 9.00% |
| Frequency | 1 | 2 | 4 |
| Maturity (Years) | 15 | 20 | 30 |
| Required Return | 9.00% | 8.00% | 9.00% |
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|
|
|
|
- Determine the price you would be willing to pay for each of these bonds using the PV function.
- Compare the price calculated in a) with the price stated in the chart above for each bond. State whether the bond is fairly priced, overpriced or underpriced.
- Determine the yield to maturity or (effective rate) on these bonds using the Rate function assuming that you purchase them at the price (per the chart above)
**Important: All work needs to be completed through Excel. Restate the information on Excel and complete by linking all calculations, where applicable.
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Public Sector Accounting And Finance
Authors: Prof Stephen Sunday Sharang Ph.D.
1st Edition
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