Question

#12 Bonds issued by Oxygen Optimization were priced at 906.89 dollars 6 months ago. The bonds pay semi-annual coupons, have a coupon rate of 13.04 percent, just made a coupon payment, and have a face value of 1,000 dollars. If the bonds had a percentage return over the past 6 months (from 6 months ago to today) of 2.25 percent, then what is the current yield of the bonds today? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

#13 Bonds issued by Fairfax Paint have a par value of 1000 dollars, were priced at 1,060.2 dollars six months ago, and are priced at 994.76 today. The bonds pay semi-annual coupons and just made a coupon payment. If the bonds had a percentage return over the past 6 months (from 6 months ago to today) of -2.37 percent, then what was the current yield of the bonds 6 months ago? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098

Answer 1

12)	% return over last 6 months of 0.0225 = (65.20+p1-906.89)/906.89
	where p1 is the price today.
	Solving for p1
	p1 = 0.0225*906.89+906.89-65.20 =	$         862.10
	Current yield for [6 months] = 65.20/862.81 =	0.0756
13)	Here we have
	=-0.0237 = (I+994.76-1060.2)/1060.2
	where I = the half yearly interest paid
	I = -0.0237*1060.2-994.76+1060.2=	$           40.31
	Current yield of the bond 6 months ago = 40.31/1060.20 =	0.0380