When you create a bond for sale, you need to set its price. You're borrowing money by selling bonds rather than stock, so you need to know the break-even price. If you know the start and end date, the interest you’ll pay, and the redemption value, you can use the PRICEDISC function to calculate the bond’s price.
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- Exercise Files
- [Voiceover] When you create a bond for sale,…you need to set its price.…If you know the start and end date, the redemption value,…and the discount rate, which is the rate that you…could receive on a no-risk investment,…then you can calculate the price you need to…charge per $100's of redemption value.…In this movie, I will show you…how to perform that calculation.…My sample file is DiscountedSecurityPrice_05_05…and that's the file that you can find in…the chapter five folder of the exercise files collection.…
Again, what we want to do, is determine the…break even price for a bond with…a redemption value of $100 and various other parameters.…The first bit of information we need to know…is the settlement date, and that is the date…on which an investor takes possession of the bond.…Next is the maturity date.…That's when you have to pay out the bond's principal,…as well as any interest its earned.…The discount rate is the rate that you…could receive from a risk-free investment.…Typically that is a United States Treasury bill…
- Analyzing loans, payments, and interest
- Calculating depreciation
- Determining values and rates of return
- Calculating bond coupon dates and security durations
- Calculating security prices and yields
- Calculating prices and yields of securities with odd periods
Skill Level Intermediate
1. Analyzing Loans, Payments, and Interest
2. Calculating Depreciation
3. Determining Values and Rates of Return
4. Calculating Bond Coupon Dates and Security Durations
5. Calculating Security Prices and Yields
6. Calculating Prices and Yields of Securities with Odd Periods
Additional resources1m 24s
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