Hi,
Is there a way I can calculate the amount of deficiency or excess on the calculator? or is it simply Par value - price of bond? So this is the question: the coupon rate on a bond is 4% and the payment is made once a year. If the time-to-maturity is five years and the market discount rate is 6%, 100 of par value can you please tell me what do i input in calculator to to get −8.425?
thank you so much!
You are trying to calculate the premium or the discount on this bond. Since the coupon rate < market rate, this will be a discount bond.
2nd CLR TVM, P/Y=C/Y=1, N = 5, I=6, PMT = 4 (4% coupon x par value of 100), FV = 100
CPT PV 91.57527
Discount = Par value - market value = 100 -91.57527 = 8.42473
It’s price − par. Here, the price is 91.5753, so
price − par = 91.5753 − 100 = −8.4247
Ah its not some complex formula then! thank you!