New User ? Sign Up | Sign In | Help

Ask All About Money
no silly or dumb question in money matters

ask

Ask whatever question, you wish. Make sure you select the correct category for the question.

answer

Like to help other, then browse through the open questions to answer their questions.

discover

Find answer by browsing the resolved questions.

My Profile

Home > Bonds & Notes > Open Question

How to calculate the present values of two corporate bonds? What would be the risk investing in these bonds?

First one issued 25 years ago at a coupon rate of 7% and the second 5 years ago also at a coupon rate of 7%. Both bonds have terms of 30 years and face values of $1,000. The interest rate on these today is at 10%.

949 day(s) ago

Comment(s) (0)

Report Abuse

Find Intereseting

E-Mail to Friends

Bookmark

Subscribe to Answer Alert

Add Comment

No comments yet !!! Be the first to comment

Answers (2)

muneepenee

1. kupon rate=7% & reel rate=10%...pries av bond went down 43%. If yu hold bond
til it "mature" (bank bi it bak at faes value), yu get kapital gaen av 43%.
Mosr resent bond: 5 yeers tu get 43% kap gaen=7.385%/yeer
2. Yer retern=interest rate+kap gaens.
Assuming the bond keep paeing & kumpanee bi it bak, i.e. assume it is sound.

Posted 860 days ago

( 0 )

Comment(s) (0)

Report Abuse

Add Comment

No comments yet !!! Be the first to comment on this answer !!!

SamirAhmed

Do you have a financial calc?Assuming annual payments. If so, the first bond has 5 years left (n=5). The coupon is $70 (assuming $1000 par value) so pmt=70, future value is fv=1000, and you said interes rates are 10%, so i=10. Hit PV to get $886.28. For the next one i=10, n=25, fv=1000, pmt= 70 so PV=$727.69. Since the only thing that changed between the 2 probs was n, then you could have just entered the new n and hit the PV key again. The answers are negative to show that you would have to pay out that much to get back $1000 at maturity @ 10% compounded interest.

Posted 949 days ago

( 0 )

Comment(s) (0)

Report Abuse

Add Comment

No comments yet !!! Be the first to comment on this answer !!!

Other Open Questions in Bonds & Notes

» what is bond ? and mutual fund what is the difference between them ? which is the best source to invest ?

Edit your answer. Click save, when done.
Question Title	How to calculate the present values of two corporate bonds? What would be the risk investing in these bonds?
Your Answer	Character Count ( Max. - 5000 ) : 217