Question

1)There is semiannual compounding bond. What would the YTM be on a 10-year, zero coupon, $1,000 par value bond that is currently trading at $551.4?

2)Allie Benson observes Samsung 8.25%, 6-year, annual-pay bond trading at 104.34% of par (where par is $100). The bond is callable at 102 in three years. What is the bond’s yield-to-call?

3)A 12-year, 9% annual-pay bond has a par value of $1,000. What is the price of the bond if it has a yield-to-maturity of 8%?

4)A 7% Mexican corporate bond is priced for settlement on 18 July 2020. The bond makes semiannual coupon payments on 18 March and 18 September of each year and matures on 19 September 2026. Using the 30/360 day-count convention, calculate the full price per Pesso 100 of par value if the YTM is 8.80% (4.40% per six months).

Answer 1

Q - 1

YTM = 2 x Rate (Nper, PMT, PV, FV) = 2 x Rate (2 x 10, 0, -551.4, 1000) = 6.04%

Q - 2

YTC = Rate (Nper, PMT, PV, FV) = Rate (3, 8.25% x 100, -104.34% x 100, 102) = 7.21%

Q - 3

Price of the bond = -PV (Rate, Nper, PMT, FV) = - PV (8%, 12, 9% x 1000, 1000) = $ 1,075.36

Q - 4

As a first step let's calculate the clean price of the bond using the PRICE function of excel as shown below:

Last coupon date = 18th March 2020

Months since last coupon date = months between 18th July & 18th March = 4 months

Hence, accrued interest = 100 x 7% x 4/12 = 2.33

Hence, Full price = Clean price + accrued interest = 91.55 + 2.33 = 93.89