Bond A is a 6-year bond with annual coupon of $5 and par value of $100. Bond B is a 4-year bond with annual coupon of %5.2189 and par value of $100. If the interest rate is same on both bonds and the two bonds have the same price, what is the interest rate?
Is there a way to solve this on excel?
I know that I can set two manual equations to each other but the problem is way too big and complicated to do by hand. I think excel is the way she wants us to solve it anyway. Please help!
2006-09-21 11:52:40 · 1 answers · asked by Anonymous in Business & Finance ➔ Other - Business & Finance
sorry. i meant Bond B has annual coupon of $5.2189
2006-09-21 11:53:23 · update #1
According to Business Finance Online, the Annual Coupon is the coupon rate times the face value, so if the interest rates are the same and bond A's face value is 100 and the coupon is 5, the rate is 5 percent and the other must be equal.
There is something I'm missing about the difference in years and the difference in coupons, but if the rates are the same and the rate on one is 5, it has to be 5 for both, right?
In Excel, if you set two equations equal to each other, it results in True or False, telling you if they actually are equal or not. Good Luck!
2006-09-24 05:56:35 · answer #1 · answered by Ken C. 6 · 0⤊ 0⤋