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Mod13 a cv3


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Mod13 a cv3

  1. 1. Module 13AC BOND VALUE CALCULATION OBJECTIVE: This is a simple valuation model for bonds with a stated (coupon) interest rate and a maturity date. Given all the relevant data, the market price of the bond is calculated. If the market interest rate is higher than the stated rate, the price of the bond will be below its maturity price, and vice versa. INPUTS (will appear in blue): 1) The bond's maturity price (usually $1,000) in cell F35. 2) The stated (coupon) annual interest rate in cell F37. This is the interest rate at which the bond was issued, and is based on the bond's maturity price. 3) Number of interest payments per year in cell F39. If the bond pays semi-annually (as is usual), enter 2. 4) The market interest rate in cell F41. This is the rate which now prevails in the market for bonds of similar quality and maturity. It is the yield to maturity. 5) Number of years to maturity in cell F43. TO OBTAIN YIELD TO MATURITY: This program is also designed to calculate the yield to maturity. In this case, the present price of the bond is known. Enter data in cells F35, F37, F39 and F43. Then, by trial and error, enter different numbers for the market interest rate in cell F41 until the actual present price is shown in cell G48. BOND PRICE CALCULATION Sample data have been entered as an example. Maturity value 1000 Stated (coupon) interest rate (in decimals) 10.0% Number of interest payments per year 2 Market interest rate -- yield (in decimals) 8.0% Years to maturity 20 Price of bond 989.64 + 208.29 = 1197.93