My Math Forum calculate bonds value. only for smart kids

 Economics Economics Forum - Financial Mathematics, Econometrics, Operations Research, Mathematical Finance, Computational Finance

 October 5th, 2008, 08:31 PM #1 Newbie   Joined: Oct 2008 Posts: 4 Thanks: 0 calculate bonds value. only for smart kids Difficult question. Only for smart kids! Company has a level coupon bond with 9% coupon rate; interest is paid annually. The bond has 20 years to maturity and a face value of $1000. Similar bonds currently yield 7%. By prior agreement the company will skip the coupon interest payment in year 8,9, and 10. These payments will be repaid without interest at maturity. What is the bonds value?  October 5th, 2008, 08:44 PM #2 Global Moderator Joined: Nov 2006 From: UTC -5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms Re: calculate bonds value. only for smart kids I've never taken financial mathematics, but comparing it to the straight-up 7% bond I'd say it's worth$1064.79. What do you get and why?
 October 6th, 2008, 11:52 AM #3 Senior Member   Joined: May 2008 Posts: 301 Thanks: 81 Re: calculate bonds value. only for smart kids I agree with CRGreathouse. $1,000\left( {1.07} \right)^{ - 20} + \left( {1,000 \times .09} \right) \cdot a_{\left. {\overline {\, 7 \,}}\! \right| .07} + \left[ {\left( {1,000 \times .09} \right) \cdot a_{\left. {\overline {\, {10} \,}}\! \right| .07} } \right]\left( {1.07} \right)^{ - 10}$ This is a difficult question?
 October 6th, 2008, 06:57 PM #4 Newbie   Joined: Oct 2008 Posts: 4 Thanks: 0 Re: calculate bonds value. only for smart kids answer must be 1134,56
 October 6th, 2008, 07:37 PM #5 Newbie   Joined: Oct 2008 Posts: 4 Thanks: 0 Re: calculate bonds value. only for smart kids without skipping interest answer will be like this: N = 20 FV= 1000 i = 7 pmt = 90 pv = ? -> 1211,88
October 7th, 2008, 09:36 AM   #6
Senior Member

Joined: May 2008

Posts: 301
Thanks: 81

Re: calculate bonds value. only for smart kids

Quote:
 Originally Posted by jbbusiness without skipping interest answer will be like this: N = 20 FV= 1000 i = 7 pmt = 90 pv = ? -> 1211,88
Agree with you on that one.
Quote:
At the risk of being repetitive, I agree with CRGreathouse.
If you’re familiar with annuity formulas and notations, it should be clear to you that the value of your first problem is equal to the present value of the final redemption payment (face value) plus the present value of 17 coupon payments (the shorthand notation of which I’ve already shown) at the current yield rate of 7%.
Now that I’ve shown you a portion of my hand, I believe it’s time for you to show us some of yours by justifying the calculations behind your “[color=#FF0000]1134,56[/color]”.

October 7th, 2008, 10:44 AM   #7
Global Moderator

Joined: Nov 2006
From: UTC -5

Posts: 16,046
Thanks: 938

Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms
Re: calculate bonds value. only for smart kids

Quote:
That's almost as much (\$1137.11) as if the skipped coupons were in the last three years. How did you get that figure?

Regardless, I'm moving this thread to Mathematics & Economics. Little as economics has to do with financial mathematics, number theory has less yet to do with it.

 Tags bonds, calculate, kids, smart

,

,

# company skip the coupon payment for bond questions

Click on a term to search for related topics.
 Thread Tools Display Modes Linear Mode

 Similar Threads Thread Thread Starter Forum Replies Last Post Denis Economics 1 October 19th, 2012 06:05 AM mathbalarka Number Theory 19 May 31st, 2012 08:18 AM Hemnir Algebra 2 January 27th, 2010 03:26 AM jbbusiness Algebra 1 October 6th, 2008 05:51 AM jbbusiness Number Theory 6 December 31st, 1969 04:00 PM

 Contact - Home - Forums - Cryptocurrency Forum - Top