Question

**Problem 7-13**

Price and yield

An 7% semiannual coupon bond matures in 4 years. The bond has a
face value of $1,000 and a current yield of 7.4538%.

a.What is the bond's price? Round your answer to the nearest
cent.

$

b.What is the bond's YTM? (*Hint:* Refer to Footnote 7 for
the definition of the current yield and to Table 7.1.) Round your
answers to two decimal places.

%

Answer #1

**a)** We have,

**Current Yield = (Interest per
annum / Current market price)*100**

7.4538 = (($1,000 * 7%) / Current market price) *100

Current market price = 70 / .074538

**= $939.12**

**bond's current market price = $939.12**

**b)** We have,

**YTM = (Interest per annum +
average other cost per annum*) / average fund
employed****

***average other cost per annum = (Redemption price -
current market price) / life remaining to mature**

= (1000 - 939.12)/4

**= $15.22**

****average fund employed = (Redemption price + current
market price) / 2**

= (1000+939.12) / 2

**= $969.56**

YTM = (Interest per annum + average other cost per annum*) / average fund employed**

= (70+15.22) / 969.56

= 0.0879

**= 8.79 %**

Note: You can confirm YTM by discounting the future cash flow at 8.79%, you will get current market price.

PRICE AND YIELD
An 8% semiannual coupon bond matures in 6 years. The bond has a
face value of $1,000 and a current yield of 8.4446%.
What is the bond's price? Do not round intermediate calculations.
Round your answer to the nearest cent.
$
What is the bond's YTM? (Hint: Refer to Footnote 7 for the
definition of the current yield and to Table 7.1.) Do not round
intermediate calculations. Round your answers to two decimal
places.

A 7% semiannual coupon bond matures in 4 years. The bond has a
face value of $1,000 and a current yield of 7.5452%.
What is the bond's price? Do not round intermediate
calculations. Round your answer to the nearest cent.
$
What is the bond's YTM? (Hint: Refer to Footnote 7 for the
definition of the current yield and to Table 7.1.) Do not round
intermediate calculations. Round your answers to two decimal
places.

A 7% semiannual coupon bond matures in 4 years. The bond has a
face value of $1,000 and a current yield of 7.5146%.
What is the bond's price? Do not round intermediate calculations.
Round your answer to the nearest cent.
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What is the bond's YTM? (Hint: Refer to Footnote 6 for the
definition of the current yield and to Table 7.1) Do not round
intermediate calculations. Round your answers to two decimal
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A 7% semiannual coupon bond matures in 6 years. The bond has a
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What is the bond's price? Do not round intermediate calculations.
Round your answer to the nearest cent.
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What is the bond's YTM? (Hint: Refer to Footnote 6 for the
definition of the current yield and to Table 7.1) Do not round
intermediate calculations. Round your answers to two decimal
places.
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face value of $1,000 and a current yield of 8.3977%. What are the
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of the current yield and to Table 7.1) Do not round intermediate
calculations. Round your answer for the bond's price to the
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face value of $1,000 and a current yield of 8.3765%.
What is the bond's price? Do not round intermediate calculations.
Round your answer to the nearest cent.
$
What is the bond's YTM? (Hint: Refer to Footnote 7 for the
definition of the current yield and to Table 7.1.) Do not round
intermediate calculations. Round your answers to two decimal
places.
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What is the bond's price? Do not round intermediate calculations.
Round your answer to the nearest cent.
$
What is the bond's YTM? (Hint: Refer to Footnote 6 for the
definition of the current yield and to Table 7.1) Do not round
intermediate calculations. Round your answers to two decimal
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What is the bond's price? Do not round intermediate calculations.
Round your answer to the nearest cent.
$
What is the bond's YTM? (Hint: Refer to Footnote 6 for the
definition of the current yield and to Table 7.1) Do not round
intermediate calculations. Round your answers to two decimal
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A 7% semiannual coupon bond matures in 5 years. The bond has a
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a. What is the bond's price? Do not round intermediate
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b. What is the bond's YTM? Do not round intermediate
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