http://www.uicinvestors.org/bonds/how-to-calculate-the-present-values-of-two-corporate-bonds-what-would-be-the-risk-investing-in-these-bonds Sun, 07 Aug 2011 02:09:59 +0000 hourly 1 http://wordpress.org/?v=3.3.1 http://www.uicinvestors.org/bonds/how-to-calculate-the-present-values-of-two-corporate-bonds-what-would-be-the-risk-investing-in-these-bonds/comment-page-1#comment-4278 J Thu, 18 Feb 2010 23:27:59 +0000 http://www.uicinvestors.org/bonds/how-to-calculate-the-present-values-of-two-corporate-bonds-what-would-be-the-risk-investing-in-these-bonds#comment-4278 Do you have a financial calc?Assuming annual payments. If so, the first bond has 5 years left (n=5). The coupon is $70 (assuming $1000 par value) so pmt=70, future value is fv=1000, and you said interes rates are 10%, so i=10. Hit PV to get $886.28. For the next one i=10, n=25, fv=1000, pmt= 70 so PV=$727.69. Since the only thing that changed between the 2 probs was n, then you could have just entered the new n and hit the PV key again. The answers are negative to show that you would have to pay out that much to get back $1000 at maturity @ 10% compounded interest.<br><b>References : </b><br> Do you have a financial calc?Assuming annual payments. If so, the first bond has 5 years left (n=5). The coupon is $70 (assuming $1000 par value) so pmt=70, future value is fv=1000, and you said interes rates are 10%, so i=10. Hit PV to get $886.28. For the next one i=10, n=25, fv=1000, pmt= 70 so PV=$727.69. Since the only thing that changed between the 2 probs was n, then you could have just entered the new n and hit the PV key again. The answers are negative to show that you would have to pay out that much to get back $1000 at maturity @ 10% compounded interest.
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