Fixed Income Question

CFA Level I Fixed Income
#1

The bonds of Apex Corporations have a par value of $10,000 each and an annual required rate of return of 10%. The bonds make quarterly coupon payments at an annual rate of 6% and have two years remaining until maturity. The current market price of each bond is closest to: $9,306. $10,749. $9,283.

The correct answer is C. I got it right, but I am a little bit confused about the process of calculation.

If I use financial calaulator : n=8 , i=2.5, pmt=150, FV=10,000 , I got PV=7,131, which is the wrong answer,

But if I use the NPV on financial calculator , I can get the right answer : 9,283

Can I know why ? Why I can’t use the first approach to come up with answer

Thanks

#2

nope I get 9283 if I do the same.

maybe you are forgetting to do 2nd FV (CLR TVM) before you do the above.

#3

Check your settings on P/Y and C/Y as well: for P/Y=C/Y=1, you will get 9,283. If you use P/Y=C/Y=4 and I/Y=10, you should get the same answer.

I tried a few combos with your parameters above and couldn’t get near 7,131. Darned if I know what you did.

ETA: the question doesn’t specify the compounding frequency for the 10% required return. If we assume bond equivalent yield,the answer is 9,304.

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#4

Hey, I got the same pb than you with an outcome of 7,131. I made a negative sign for PMT…that is why we did not have the 9,283…

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#5

:man_facepalming: :roll_eyes:

Thanks, Razika!!! :+1: