#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
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 |
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