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%