quick economics questions, anyone help?

markg86

Estimate the price for the following Irish government bond: it has a coupon of 4% payable annually, has a term to maturity of 5 years, and has yield of 7.5%. What Excel formula would you use to calculate the bond’s price?

I know the formula but should I use the yield (7.5%) or the coupon rate 4% as r

bond price = coupon payment/1+r^t + par value/1+r^t

also

What would happen to a bond’s yield to maturity (YTM) if

(i) the coupon rate were lower and
(ii) the bond’s price were higher?
Explain your answers.

any reply would be appreciated

couldn't take my exams at the summer so have 6 over a week starting Thursday freaking a lil now ha

Cheers folks,,

markg86

so nobody? that's a bummer!

DylanII

markg86 wrote: »

Estimate the price for the following Irish government bond: it has a coupon of 4% payable annually, has a term to maturity of 5 years, and has yield of 7.5%. What Excel formula would you use to calculate the bond’s price?

I know the formula but should I use the yield (7.5%) or the coupon rate 4% as r

bond price = coupon payment/1+r^t + par value/1+r^t

also

What would happen to a bond’s yield to maturity (YTM) if

(i) the coupon rate were lower and
(ii) the bond’s price were higher?
Explain your answers.

any reply would be appreciated

couldn't take my exams at the summer so have 6 over a week starting Thursday freaking a lil now ha

Cheers folks,,

I am in now way an expert in Economics so anything I say may be a load of BS.

I hate working out excel formulas so Im not going to do that.

If the coupon rate is lowered then so is the YTM. The YTM is the annual return as a percentage. If the coupon rate is lowered then so is the YTM as the coupon payments are a large part of the YTM.

If the bonds price was higher then the YTM is also lower.

Im sure if you do some googleing then you find the actual answers and reasons.

markg86

cool thanks,,