A.Bond Prices A $1,000 par bond that pays interest semiannually has a quoted coupon rate of 7%, a promised yield to maturity of 7.7% and exactly 6 years to maturity. What is the bond's current value? |
B.Bond Prices A $1,000 par bond that pays interest semiannually has a quoted coupon rate of 5%, a promised yield to maturity of 5.7% and exactly 11 years to maturity. The present value of the coupon stream represents ______ of the total bond's value.
C. Bond Yields Find the promised yield to maturity for a 7% coupon, $1,000 par 15 year bond selling at $946.22. The bond makes semiannual coupon payments. |
Bond price =
Coupon/(1+r)^{t} + Par Value/(1+r)^{t}
A. Coupon = Coupon rate * Par value/2 = 1000*7%/2 = 35
Coupon/(1+YTM/2)^{2t} + Par Value/(1+YTM/2)^{2t}+
Par Value/(1+YTM/2)^{2t}
35/(1+7.7%/2)^{2t} + 1000/(1+ 7.7%/2)^{2t} = 966.86
B. Coupon rate = 5%
Maturity = 11years
Coupon = Coupon rate * Par value/2 = 5%* 1000/2 = 25
Present value of coupon Coupon/(1+YTM/2)^{2t}
= 25(1+5.7%/2)^{2t}
= 404.48
C. Coupon = Coupon rate * Par value/2 = 1000*7%/2 = 35
Maturity = 15 years
Price of bond =
Coupon/(1+YTM/2)^{2t} + Par
Value/(1+YTM/2)^{2t}
946.22 = 35/(1+YTM/2)^{2t}
+ 1000/(1+YTM/2)^{2t}
YTM = 7.61%
Best of Luck. God Bless
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