Matteo S.

asked • 06/30/20

Calculate the price of a bond. Show your calculations

Company ROOS is partly financed with a bond loan. The bonds are so-called 'level coupon bonds'. The nominal value of each of the bonds is €1.000 and the coupon 3%. The coupon is paid annually. The remaining maturity of the bonds is 4 years. The yield to maturity of the bonds is 6%. Assume there is no default risk.

 

Questions:

a. Calculate the price of a bond. Show your calculations. (6 points)

b. At what market interest rate does the price of the bond equal the nominal value? (4 points)


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