## Bond Valuation Practice Problems

1. The \$1,000 face value ABC bond has a coupon rate of 6%, with interest paid semi-annually, and matures in 5 years. If the bond is priced to yield 8%, what is the bond's value today?
• FV = \$1,000
• CF = \$60/2 = \$30
• N = 5 x 2 = 10
• i = 8%/2 = 4%

• PV = \$918.89

2. The \$1,000 face value EFG bond has a coupon of 10% (paid semi-annually), matures in 4 years, and has current price of \$1,140. What is the EFG bond's yield to maturity?
• FV = \$1,000
• CF = \$100/2 = \$50
• N = 4 x 2 = 8
• PV = \$1,140

• i = 3%
• yield-to-maturity = 3% x 2 = 6%

3. The HIJ bond has a current price of \$800, a maturity value of \$1,000, and matures in 5 years. If interest is paid semi-annually and the bond is priced to yield 8%, what is the bond's annual coupon rate?
• PV = \$800
• FV = \$1,000
• N = 5 x 2 = 10
• i = 8% / 2 = 4%

• CF = \$15.34
• Coupon = \$30.68 per year or 3.068%

4. The KLM bond has a 8% coupon rate (with interest paid semi-annually), a maturity value of \$1,000, and matures in 5 years. If the bond is priced to yield 6%, what is the bond's current price?
• CF = \$40
• FV = \$1,000
• N = 10
• i = 6%/2 = 3%

• PV = \$1,085

5. The NOP bond has an 8% coupon rate (semi-annual interest), a maturity value of \$1,000, matures in 5 years, and a current price of \$1,200. What is the NOP's yield-to-maturity?
• CF = \$40
• FV = \$1,000
• N = 5 x 2 = 10
• PV = \$1,200

• i = 1.797%
• yield-to-maturity = 1.797% x 2 = 3.594%