Calculate the current yield of both bonds

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Reference no: EM131368366

After recently receiving a bonus, you have decided to add some bonds to your investment portfolio. You have narrowed your choice down to the following bonds (assume semiannual payments):

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a. Using the PRICE function, calculate the intrinsic value of each bond. Is either bond currently undervalued? How much accrued interest would you have to pay for each bond?

b. Calculate the current yield of both bonds.

c. Using the YIELD function, calculate the yield to maturity of each bond using the current market prices. How do the YTMs compare to the current yields of the bonds?

d. Calculate the duration and modified duration of each bond.

e. Which bond would you rather own if you expect market rates to fall by 2% across the maturity spectrum? What if rates will rise by 2%? Why?

Reference no: EM131368366

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