Question

A zero is priced at $589. It has 8 years to the maturity. What is the yield to maturity of this bond? Round to the nearest hundredth percent. Do not include the percent sign in your answer. (For example, if your answer is 5.67%, type 5.67 without % sign)

What is the price of a $1,000 par value bond with an 8% coupon rate paid annually, and 6 years to maturity if the bond is currently sold at the yield-to-maturity of 7.32%? Round to the nearest cent. Do not a dollar sign in your answer. (i.e. If your answer is $432.51, then type 432.51 without $ sign)

An 8% annual coupon bond, with a face value of $1,000 that matures in 15 years, pays interest annually, and has a yield to maturity of 9.75 percent. What is the current market price of the bond? Round to the nearest cent. Do not a dollar sign in your answer. (i.e. If your answer is $432.51, then type 432.51 without $ sign)

Answer 1

Answer to QUESTION-1

Yield to Maturity [YTM] = Coupon Amount + [ (Face Value – Bond Price) / Maturity Years] / [(Face Value + Bond Price)/2]

= $0 + [ ($1,000 - $589) / 8 Years)] / [($1,000 + $589) / 2]

= [($0 + 51.38) / $794.50] x 100

= 6.84%

Answer to QUESTION-2

Price of the Bond = Present Value of the Coupon Payments + Present Value of the Par Value

= $80[PVIFA 7.32%, 6 Years] + $1,000[PVIF 7.32%, 6 Years]

= [$80 x 4.719814] + [$1,000 x 0.6545095]

= $377.59 + 654.51

= $1,032.09

The Price of the Bond = $1,032.09

Answer to QUESTION-3

Current market price of the Bond = Present Value of the Coupon Payments + Present Value of the Par Value

= $80[PVIFA 9.75%, 15 Years] + $1,000[PVIF 9.75%, 15 Years]

= [$80 x 7.715861] + [$1,000 x 0.247703]

= $617.27 + 247.70

= $864.97

The Current market Price of the Bond = $864.97