Answer to Question #221576 in Financial Math for Loly

Question

Consider Bond XYZ

Coupon rate: 9,75% per year

Yield to maturity: 11,4% per year

Maturity date: 15 April 2047

Settlement date: 29 November 2021

The clean price is

Answer 1

Formula;

=PRICE(settlement, maturity, rate, yield, redemption, frequency, [basis])

 

1. Settlement – The bond’s settlement date.
2. Maturity – date when the bond expires.
3. Rate – the annual coupon rate of the bond.
4. Yield -The annual yield of the bond.
5. redemption - the redemption value of the bond per $100 face value.
6. Frequency – The number of coupon payments per year.
7. Basis – Specifies the financial day count basis that is used by the bond.

 

explanation

we will first enter '=' sign, then type 'PRICE' and select the price function from the list. After that, we will add the inputs as suggested. Settlement date, maturity date, coupon rate, yield to maturity, redemption per 100 (100 if redeemable at par), frequency of payments, and basis.

redemption (required argument) – This is the redemption value of the bond per $100 face value. So if we solve the answer will be;

R 86, 39249%