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% |
- Determine the highest price you would be willing to pay for each of these bonds using the PV function. Also find whether the bond is undervalued, overvalued, or fairly valued.
- Determine the yield to maturity on these bonds using the Rate function assuming that you purchase them at the given price. Also calculate the current yield of each bond.
- Assume the following settlement dates for each bond:
|
| Bond 1 | Bond 2 | Bond 3 |
| Settlement Date | 1/1/2018 | 6/1/2018 | 9/1/2018 |
Use the Price and Yield functions to recalculate your answers on parts (a), (b), and (c).
- Determine the duration and the modified duration of each bond.
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Emerging Markets And The Global Economy A Handbook
Authors: Mohammed El Hedi Arouri, Sabri Boubaker, Duc Khuong Nguyen
1st Edition
