Bond Value & IRR
Please answer the following problem in an Excel file.
Suppose you are considering purchasing a 10% annual coupon
bond, with 15 year remaining. The par value is $1000. Given the rating of the
bond investors are requiring 15% return on bonds of this type. What is your
estimate of the bond’s value, in other words how much are you willing to pay?
An insurance firm agrees to pay you $3,310 at the end of 20
years if you pay premiums of $100 per year at the end of each year for the 20
years. Find the IRR to the nearest whole percentage point.
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