Question

a. Several years ago, Castles in the Sand Inc. issued bonds at face value of $1,000 at a yield to maturity of 5%. Now, with 5 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 10%. What is the price of the bond now? (Assume semiannual coupon payments.) (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 90% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Answer #1

Calculate the above subparts using excel functions as follows:

The values will appear as follows:

a. Several years ago, Castles in the Sand Inc. issued bonds at
face value of $1,000 at a yield to maturity of 6%. Now, with 6
years left until the maturity of the bonds, the company has run
into hard times and the yield to maturity on the bonds has
increased to 11%. What is the price of the bond now? (Assume
semiannual coupon payments.) (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Bond Price:
b....

a. Several years ago, Castles in the Sand Inc. issued bonds at
face value of $1,000 at a yield to maturity of 6.6%. Now, with 6
years left until the maturity of the bonds, the company has run
into hard times and the yield to maturity on the bonds has
increased to 13%. What is the price of the bond now? (Assume
semiannual coupon payments.) (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
b. Suppose that...

a. Several years ago, Castles in the Sand Inc. issued bonds at
face value of $1,000 at a yield to maturity of 6%. Now, with 6
years left until the maturity of the bonds, the company has run
into hard times and the yield to maturity on the bonds has
increased to 11%. What is the price of the bond now? (Assume
semiannual coupon payments.)
b. Suppose that investors believe that Castles
can make good on the promised coupon payments...

A firm's bonds have a maturity of 10 years with a $1,000 face
value, have an 11% semiannual coupon, are callable in 5 years at
$1,175.15, and currently sell at a price of $1,313.90.
What is their nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
What is their nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal places.

A firm's bonds have a maturity of 10 years with a $1,000 face
value, have an 11% semiannual coupon, are callable in 5 years at
$1,178, and currently sell at a price of $1,320.15.
What is their nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
%
What is their nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal places.
%

(CHAPTER 7) A corporation has just issued 6% coupon bonds with
$1,000 face value. These bonds will mature in 13 years, and until
then they will be making annual payments to their holders. The
yield to maturity on these bonds is 9%. Given these bond
characteristics, how much should each of these bonds be selling for
in today's market? (Increase decimal places for any intermediate
calculations, from the default 2 to 6 or higher. Only round your
final answer to...

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value, have an 11% semiannual coupon, are callable in 6 years at
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What is their nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
%
What is their nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal places.
%
What return should investors expect to...

A firm's bonds have a maturity of 12 years with a $1,000 face
value, have an 8% semiannual coupon, are callable in 6 years at
$1,063, and currently sell at a price of $1,118.34.
What is their nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
What is their nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal places.
What return should investors expect to earn on...

A firm's bonds have a maturity of 8 years with a $1,000 face
value, have an 11% semiannual coupon, are callable in 4 years at
$1,149, and currently sell at a price of $1,275.86. What is their
nominal yield to maturity? Do not round intermediate calculations.
Round your answer to two decimal places. % What is their nominal
yield to call? Do not round intermediate calculations. Round your
answer to two decimal places. % What return should investors expect
to...

A firm's bonds have a maturity of 14 years with a $1,000 face
value, have an 11% semiannual coupon, are callable in 7 years at
$1,235, and currently sell at a price of $1,404.96. What is their
nominal yield to maturity? Do not round intermediate calculations.
Round your answer to two decimal places. 3.27 % What is their
nominal yield to call? Do not round intermediate calculations.
Round your answer to two decimal places. 5.14 % What return should
investors...

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