Fixed income instrument

chandniwadhwani92
Finance Junkie
Posts: 166
Joined: Mon Oct 06, 2014 7:36 am

Fixed income instrument

Postby chandniwadhwani92 » Thu Dec 18, 2014 2:25 pm

Assume a city issues a $5 million bond to build a new arena. The bond pays 8% semiannual interest and will mature in 10 years. Current interest rates are 9%. What is the present value of this bond and what will the bond's value be in seven years from today?

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Fixed income instrument

Postby edupristine » Fri Dec 19, 2014 10:27 am

PV of Bond= FV= 5000000, Pmt= 200000, I/Y = 4.5%, N=20, CPT - PV= -4674801.589

PV of Bond after 7 years = FV= 5000000, Pmt= 200000, I/Y = 4.5%, N=6, CPT - PV= -4871053.188

chandniwadhwani92
Finance Junkie
Posts: 166
Joined: Mon Oct 06, 2014 7:36 am

Fixed income instrument

Postby chandniwadhwani92 » Fri Dec 19, 2014 1:08 pm

Why n=6 why not 7


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