# Finance bonds

 Coupon regular interest payments that borrower pays level coupon bond constant coupon paid every year. Face value/Par value Amount that will be repaid/principal paid at maturity Coupon rate annual coupon divided by face value (120/1000=.12) Coupon payment stated interest on bond Maturity # of years until face value repaid As interest rates increase, the present values_____ declines (worth less/interest rates increase bond prices decrease) When interest rates fall, the bond is worth______ More Yield or Yield to maturity (YTM) rate required in the market Current Yield Annual Coupon/Price Bond value = PV of coupons + PV of par valueorPV of annuity +PV of lump sum Consider a bond with a coupon rate of 10% and annual coupons. The par value is \$1,000 and the bond has 5 years to maturity. The yield to maturity is 11%. What is the value of the bond? N =5; I/Y = 11; PMT = 100; FV = 1,000 CPT PV = -963.04 Discount bond bond sells for less than face value §Suppose you are looking at a bond that has a 10% annual coupon and a face value of \$1000. There are 20 years to maturity and the yield to maturity is 8%. What is the price of this bond? N =20; I/Y = 8; PMT = 100; FV = 1000 CPTPV = -1,196.36premium 1.If YTM = coupon rate, then par value =_____ bond price 1.If YTM > coupon rate, then par value > ______ bond price If YTM < coupon rate, then par value <______ bond price Let the Coupon rate = 14% with semiannual coupons; YTM = 16%; Maturity = 7 years; Par value = \$1,000 What is the bond worth now? 1.How many coupon payments are there? 2.What is the semiannual coupon payment? 3.What is the semiannual yield? PMT = 70; N = 14; I/Y = 8; FV =1,000; CPT PV = -917.56 Authorbobjr247 ID108226 Card SetFinance bonds Descriptionch. 6 Updated2011-10-12T00:00:00Z Show Answers