Question

**Chapter 6 Spreadsheet
Problem**

**Bond
Valuation**

Jenna bought a bond that was issued by Sherlock Watson Industries (SWI) three years ago. The bond has a $1,000 maturity value, a coupon rate equal to 9 percent, and it matures in 17 years. Interest is paid every six months; the next interest payment is scheduled for six months from today.

**a. **
If the yield on similar risk investments is 12 percent, what is the
current market value (price) of the bond?

**b. **
Compute the capital gains yield, current yield, and total yield
that Jenna will earn if she holds the bond until it matures. Assume
that the market rate does not change from now until maturity?

c**. **
Suppose that Joan just bought a 15-year bond for $902.71. The bond
has a coupon rate equal to 7 percent, and interest is paid
semiannually. What is the bond’s yield to maturity (YTM)? If Joan
holds the bond for the next three years and its YTM does not change
during that period, what return will she earn each year? What
portion of the annual return represents capital gains and what
portion represents the current yield?

d**. **
Suppose that James just bought the same bond that Joan bought, but
he bought it two years later for $1,034.55. If James plans to hold
his bond for five years and its YTM does not change during that
period, what return will he earn each year? What portion of the
annual return represents capital gains and what portion represents
the current yield?

Answer #1

Bond Valuation
C) Suppose that Joan just bought a 15-year bond
for $902.71. The bond has a coupon rate equal to 7 percent, and
interest is paid semiannually. What is the bond’s yield to maturity
(YTM)? If Joan holds the bond for the next three years and its YTM
does not change during that period, what return will she earn each
year? What portion of the annual return represents capital gains
and what portion represents the current yield?
D) Suppose...

Holding Period Yield [LO2] The YTM on a bond is the interest
rate you earn on your investment if interest rates don't change. If
you actually sell the bond before it matures, your realized return
is known as the holding period yield (HPY).
a. Suppose that today you buy a 7 percent annual coupon bond for
$1,060. The bond has 10 years to maturity. What rate of return do
you expect to earn on your investment?
b. Two years from...

eBook Problem Walk-Through
Last year Carson Industries issued a 10-year, 15% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,075 and it sells for $1,270.
What are the bond's nominal yield to maturity and its nominal
yield to call? Do not round intermediate calculations. Round your
answers to two decimal places.
YTM: %
YTC: %
Would an investor be more likely to earn the YTM or the YTC?...

Last year Carson Industries issued a 10-year, 14% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,070 and it sells for $1,280.
What are the bond's nominal yield to maturity and its nominal
yield to call? Do not round intermediate calculations. Round your
answers to two decimal places.
YTM: %
YTC: %
Would an investor be more likely to earn the YTM or the YTC?
-Select-Since the YTM...

Last year Carson Industries issued a 10-year, 13% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,065 and it sells for $1,200.
What are the bond's nominal yield to maturity and its nominal
yield to call? Do not round intermediate calculations. Round your
answers to two decimal places.
YTM: %
YTC: %
Would an investor be more likely to earn the YTM or the YTC?
-Select-Since the YTM...

BOND YIELDS
Last year Carson Industries issued a 10-year, 13% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,065 and it sells for $1,230.
What is the bond's nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
%
What is the bond's nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal places.
%...

BOND YIELDS
Last year Carson Industries issued a 10-year, 12% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,060 and it sells for $1,300.
What is the bond's nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
%
What is the bond's nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal places.
%...

Bond yields
One year ago Carson Industries issued a 10-year, 13% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,065, and it now sells for
$1,200.
What is the bond's nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
%
What is the bond's nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal...

One year ago Clark Company issued a 10-year, 13% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,065, and it now sells for
$1,230. What is the bond's nominal yield to maturity? Round your
answer to two decimal places. % What is the bond's nominal yield to
call? Round your answer to two decimal places. % Would an investor
be more likely to earn the YTM...

Last year Carson Industries issued a 10-year, 12% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,060 and it sells for $1,150.
What are the bond's nominal yield to maturity and its nominal yield
to call? Do not round intermediate calculations. Round your answers
to two decimal places. YTM: % YTC: % Would an investor be more
likely to earn the YTM or the YTC? What...

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