Finance – bonds | Business & Finance homework help

I am struggling in calculating bonds.  Below is the requirements:

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Assume interest rates for bonds today is 5% for an AAA rated bond. Calculate the price of the bond you have selected relative to the 5%. Is the bond selling at a premium or a discount? Why? Be sure to show how you arrived at your answer.  What other factors may influence the value of a bond? 

 

Here is what I have done so far:

 

Assume interest rates for bonds today is 5% for an AAA rated bond. Calculate the price of the bond you have selected relative to the 5%.

 

I selected the bond Goldman Sachs Group Inc., Non-callable, Semi-Annual coupon frequency payment

 

 

 

Price: 101.02 

 

Coupon: 5.125%

 

Yield to Maturity = -3.694% 

 

Current Yield: 5.073

 

 The semi-annual coupon rate is 2.5625 (5.125 / 2%).  The assumed interest rate of 5% is displayed as .25 (5% / 2%).  This is a 10 year bond so the number of periods is 20 since this is paid semi-annually (10 * 2).

 

 PVo = ( coupon) (1 – [1/ (1 + r)ᵐ] )     + ( par value )

 

                              R                                  (1 + r)ᵐ 

 

PVo = (2.56) (1 – [1/(1 + .025)20])  +  (1,000)

 

                              .025                  (1 + .025)20

 

PVo = (2.56) (1-[1/(1.025)20])  +  (1,000)

                      .025                           (1.025)20

 

 

Here is the information on the bond:

 

 

 

GOLDMAN SACHS GROUP INC

As of 3-Dec-2015

   

 

 

 

 

 

 

 

 

 

Price:

101.02

Coupon (%):

5.125

Maturity Date:

15-Jan-2015

Yield to Maturity (%):

-3.694

Current Yield (%):

5.073

Fitch Ratings:

A

Coupon Payment Frequency:

Semi-Annual

First Coupon Date:

15-Jul-2005

Type:

Corporate

Callable:

No

 

 

 

 

 

 

 

 

 

 

Quantity Available:

7

Minimum Trade Qty:

2

Dated Date:

12-Jan-2005

Settlement Date:

4-Dec-2014

 

 

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