Explain what you see from the pricing calculations. How do the two bonds differ?
Bond C
Given: n = Period which takes values from 0 to the nth period = 0,1,2,3 & 4
Cn = Coupon payment in the nth period = 10%*$1,000 = $100
YTM = interest rate or required yield = 9.6%
P = Par Value of the bond = $1,000
Bond Z
Bond Price = PV(rate,nper,pmt,fv)
Given: n = Period which takes values from 0 to the nth period = 0,1,2,3 & 4
Cn = Coupon payment in the nth period = 0%*$1,000 = $0.00
YTM = interest rate or required yield = 9.6%
P = Par Value of the bond = $1,000
|
years |
Bond A |
Bond Z |
|
4 |
$1,012.79 |
$693.04 |
|
3 |
$1,010.02 |
$759.57 |
|
2 |
$1,006.98 |
$832.49 |
|
1 |
$1,003.65 |
$912.41 |
|
0 |
$1,000.00 |
$1,000.00 |
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