Interest Bond Calculator

 

Interest Bond Calculator

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Seth Said:

You want to purchase a 10 year, 1000 face value bond that paysinterest of $60.00 every 6 months with 10% rate? We Answered:

I'm assuming you don't care about how far are you in between coupon payments....the seller will want a share of the next coupon pmt and this will affect the price. Just plug this into an Excel formula or use a financial calculator. ca lculator. Forget that old-fashioned mathematical formula. It's present value will be $1,124.62. I'd personally pay anything less than this amount to earn money. Virgil Said:

how calculate bond price in Casio Financial Calculator? We Answered:

RDV = Redemption Value(it is always 100 unless otherwise stated. because you want your output, for example the price of the bond always be a percentage of the redemption value. In most cases RDV in terms of dollars is $1000. D1 is your first given date (usually the issue is sue or purchase date) D2 is the second date (usually the sell or maturity date) D2 - D1 is the period the bond reaches maturity CPN is coupon rate (interest paid in each period divided by the face value of the bond) PRC is the PURCHASE price of the bond (it is entered as a percentage of the face value of the bond. so if the purchase price is $1136.16 you enter -113.616. make sure you enter as a negative number. it only

 

works this way) YLD is yield interest rate (per period. it could be the annual rate or semianuual rate depending on how you y ou setup your calculator). which is kinda like the interest at market rate. Example>> A $1000 bond that pays interest at 12% and is redeemable at par at the end of 10 years. Find the purchase price to yield 10% compounded semiannually. Here n is number of compound periods, RDV is redemption price, CPN is nominal interest or annual coupon rate, PRC is purchase price and YLD is annual yield. Operation you can either assume two dates 10 years apart at put them for D1 and D2 or you can choose the term to be 10 years in i n your calculator. and we have n= 2x10 = 20. RDV is always 100 unless stated otherwise, and we let CPN as 12% and YLD as 10%. Our goal is to find the purchase price, or PRC. so we solve for PRC I hope that helped ;) Dave Said: Bond Question, Semiannual Interest? We Answered:

you don't need to set anything on your calculator. Semiannual payment simply means that you have 15 yrs x 2 periods =30 , 7%/2 =3.5 % coupon rate at a 10%/2 =5% discount rate. remember that all it means is that interest is compounded twice a year, but the stated interest rate is annualized. Hope this helps Sidney Said:

How much can be paid for a $5000, 10% bond,with interest paid semiannually,if the bond matures 12 years?

 

We Answered:

You can pay any price you are willing willi ng to pay. You must have misstated your question. Do you mean, how much can you pay to get a yield to maturity of 8% which would involve i nvolve paying a premium for the bond? Here li nk that may help which shows how to calculate Y-t_M and link yield is toacall. http://www.tvmcalcs.com/calculators/apps… Dwight Said:

HOw do use a financial calculator to find a bond payment? We Answered:

If you are familiar with the calculator this will wil l be a sinch.... ** OOPS THIS IS FOR A TI CALC** In a bond problem, we are given four of five possible inputs (N, I/Y, PMT, PV, FV) and are asked to solve for the one not given. For example, you may be given the Number of Payments (N), the coupon paymen (PMT), and the bond price (PV) , and Face Value (FV) and ask to solve forthe Interest Rate (I/Y). Imagine all the different possible combinations and interpret each one as a financial problem. Suppose you wish to solve for the yield to maturity on a five-year bond with an $8 coupon and $100 face value selling for $100. 1. Yield to Maturity: Input 5 [N], 8 [PMT], -100 [PV], and 100 [FV]. Press [CPT] [I/Y]. 2. Price: Input 5 [N], 8 [I/Y] , 8 [PMT], and 100 [FV]. Press [CPT] [PV]. Semiannual Interest (10 periods half-year periods) 1. Yield to Maturity: Input 10 [N], 4 [PMT], -100 [PV], and 100 [FV]. Press [CPT] [I/Y]. Result is rate over six months, and so double number

 

to obtain annual rate compounded semiannually. 2. Price: Input 5 [N], 4 [I/Y] , 4 [PMT], and 100 [FV]. Press [CPT] [PV]. Phillip Said: bond is issued with a face value of $20,000,000. contract rate of interestis 8% and paid semi annual...? We Answered:

The price of a bond is equal the present value of all al l cash flows to be paid by the bond. To make this problem a bit easier to solve, we first find how many bond has being issued. Since the face value of 1 bond is $1000 and this issue has a face value of $20,000,000; we conclude that the company sold 20,000 bonds (20million/1,000). From the problem we have that, Market Interest rate is 12% per year or 65 per semester Interest payments = 8% of face value = 8% 8 % times 1000= 80 per bond per year or $40 per semester Period = 20 years = 40 semesters Face value = 1,000 per bond 1) To find the price of one bond we can use the formula P = PV Cash Flows + PV of Face Fa ce Value where PV = Present Value. Or (financial calculator) to solve this problem. Excel formula to findExcel the Price of a bond is = -PV(rate; nper; pmt; fv) where rate = market interest rate ,6% nper = period , 40 semesters pmt = payments or cash flows, in this case is $40 fv = face value= 1,000 Using this formula, PV = $700 (rounding) So the price of is $700 per bond. In this case the bond is priced at

 

discount (price below $1,000) 2) Interest expense per year is $80 per bond. Because 20,000 bonds were sold, the total interest paid is $1,600,000 3) Effective interest is the interest paid plus the amortization of discount on the bond during the year. The discount is $300 (1,000 -700) per bond. Since 20,000 bonds were sold, the total discount to be amortized is $ 6,000,000 (300 x 20,000). Using the straight line amortization, the amount to be amortized for 20 years is 6,000,000/20 = $300,000 The amount of effective interest will be: Interest on the bond + Amortization 1,600,000 + 300,000 = 1,900,000. 4) If you do your work using Excel, just change the rate from 12% a year to 6% a year and the values will wi ll be recalculated using the new rate. Make note that , the market interest rate (6%) is lower than the interest paid on the bond (8%). In this case the bond will sell at a premium (price >$1,000). Bonds pay a fixed interest rate to investors over the life of the agreement. Since the interest rates offered for  new bonds change over time, a situation exists where some bonds pay more or less interest than others on the market, even if the bonds are sold by the same company. Calculating the market value of bonds in your  portfolio can help you to determine whether you can make a sufficient profit on selling a bond in the market in order to justify letting it go.

Step 1 Determine your bond's face value, its interest rate and the present interest rate offered on new bonds. The interest rate offered in the market at any given time may or may not be the same as the rate on a bond that you hold. As an example, you may have a $1,000 face value bond paying 10 percent interest when the prevailing market interest rate is 9 percent.

 

Step 2 Determine the number of interest, or coupon, payments that are remaining on the life of the bond. Determine the total amount of each regular interest payment as well. To continue the example above, if your bond has seven years left until maturity, at 10 percent interest the annual interest payments would come to $100, and there would be seven remaining coupon payments.

Step 3 Calculate the present value of your bond's coupon payments (PVC). Use an annuity table (see Resources 2) to begin calculating PVC. Find the cell in the table matching up with the number of remaining coupon payments -- left column -- and the current market interest rate -- top row -- in the table, then multiply the number in that cell by the value of the regular interest payments to find your PVC. In the example, the PVC would work out to be around $503 (5.03295 x $100).

Step 4 Calculate the present value of the bond's par value (PVP). Use the following formula (^ means "raised to the power of") to calculate PVP : Bond Par Value = PVP (1 + Current Market Rate) ^ Number of Interest Periods Plug in the variables and solve algebraically to isolate PVP in the equation. In our example, PVP would work out to be around $583.

Step 5  Add PVC and PVP to determine the current market value of your bond. In our $1,000 $1, 000 bond example, adding $503 (PVC) and $583 (PVP) indicates a present market value of $1,086.

 Are you sure you don't want want a yield? To not be able to solve the coupon rate in your head, you have to not know the periodic payment. If you are truely in need of the coupon rate, then use the =pmt(...) function in excel. Divide Divide this by the face value- NOT market value- of the bond. And then multiply by the number of payments per year. This gives you the annual coupon rate. For example, suppose you find that the pmt=$55 on a bond that pays semi-annually and a face value of $1,000. Then your annual coupon rate is: 2*55/1000=11%.