Question

An 8% coupon bond, $1,000 par value, annual payments, 10 years to maturity is callable in 7 years at a call price of $1,200. If the bond is selling today for $900, the yield to call is closest to

Answer #1

Yield to call | = | Average Income/Average Investment | ||||||||||

= | ((Coupon+(Call price-Current Selling price)/Years to call)/((Current Selling price+Call price)/2) | |||||||||||

= | ((80+(1200-900)/7)/((1200+900)/2)) | |||||||||||

= | 11.70% |
|||||||||||

Working: | ||||||||||||

Annual coupon | = | Par Value x Coupon rate | ||||||||||

= | $ 1,000 | x | 8% | |||||||||

= | $ 80 |

Bond 1
Coupon rate
6%
Annual coupon frequency
2
Par
$1,000
Time to maturity (years)
10
2. (10 points) Compute the following yields:
a) the yield to maturity for
Bond 1, above, if the current bond price is
$875.
b) the yield to call for Bond 1 if its
current price is $1050 and it is callable in 4 years at a value of
par plus one year’s coupon interest.

A bond has a $1,000 par value, 10 years to maturity, and an 8%
annual coupon and sells for $980.
What is its yield to maturity (YTM)? Round your answer to two
decimal places.
%
Assume that the yield to maturity remains constant for the next
five years. What will the price be 5 years from today? Do not round
intermediate calculations. Round your answer to the nearest cent.
$

A 20-year, 8% annual coupon bond
with a par value of $1,000 may be called in 5 years at a call price
of $1,040. The bond sells for $1,100. (Assume that the bond has
just been issued.)
Basic Input Data:
Years to maturity:
20
Periods
per year:
1
Periods
to maturity:
20
Coupon
rate:
8%
Par
value:
$1,000
Periodic
payment:
$80
Current
price
$1,100
Call
price:
$1,040
Years
till callable:
5
Periods
till callable:
5
a. What is the bond's...

ABC
Co. bonds have a term to maturity of 15 years, callable, 8%
semi-annual coupon bonds at their par value of $1000. the bond is
selling for $925 today. the call price is $1080. if the bond is
expected to be called in 5 years, how much is the yield to
call?

A bond has a $1,000 par value, 8 years to maturity, and a 7%
annual coupon and sells for $980.
What is its yield to maturity (YTM)? Round your answer to two
decimal places.
%
Assume that the yield to maturity remains constant for the next
two years. What will the price be 2 years from today? Do not round
intermediate calculations. Round your answer to the nearest cent.
$

bond has a $1,000 par value, 8 years to maturity, and a 7%
annual coupon and sells for $980.
What is its yield to maturity (YTM)? Round your answer to two
decimal places.
%
Assume that the yield to maturity remains constant for the next
four years. What will the price be 4 years from today? Do not round
intermediate calculations. Round your answer to the nearest cent.
$

A bond has a $1,000 par value, 8 years to maturity, and a 7%
annual coupon and sells for $980.
What is its yield to maturity (YTM)? Round your answer to two
decimal places.
%
Assume that the yield to maturity remains constant for the next
two years. What will the price be 2 years from today? Do not round
intermediate calculations. Round your answer to the nearest cent.
$

PART 2 - BOND CALCULATIONS
a) What is the price of a $1,000 par value, semi-annual coupon
bond with 16 years to maturity, a coupon rate of 5.40% and a
yield-to-maturity of 5.90%?
b) What is the price of a $1,000 par value, 10 year, annual
coupon bond with a 5.80% coupon rate and a yield to maturity of
5.50%
c) A 10-year, 6.30% semi-annual coupon bond today and the
current market rate of return is 5.60%. The bond is...

Suppose that a 9% semi-annual coupon bond with a time to
maturity of 10 years and a par value of $100 has a price of $107,5.
This bond is first callable in 7 years at a redemption price of
$105,5. What is the yield to maturity for this bond? What is the
yield to first call for this bond?

You purchase for $900, $1000 par value 10-year 8% coupon bond
with semiannual payments that is callable in 5 years at $1,100.
What is the bonds yield to call? (YTC)

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