Question

A firm's bonds have a maturity of 8 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 4 years at $1,148, and currently sell at a price of $1,271.54.

What is their nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.

%

What is their nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal places.

%

What return should investors expect to earn on these bonds?

Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC.

Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.

Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM.

Investors would expect the bonds to be called and to earn the YTC because the YTM is less than the YTC.

Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM.

Answer #1

Answer a.

Face Value = $1,000

Current Price = $1,271.54

Annual Coupon Rate = 11%

Semiannual Coupon Rate = 5.5%

Semiannual Coupon = 5.5%*$1,000 = $55

Semiannual Period to Maturity = 16 (8 years)

Let semiannual YTM be i%

$1,271.54 = $55 * PVIFA(i%, 16) + $1,000 * PVIF(i%, 16)

Using financial calculator:

N = 16

PV = -1271.54

PMT = 55

FV = 1000

I/Y = 3.29%

Semiannual YTM = 3.29%

Annual YTM = 2*3.29%

Annual YTM = 6.58%

Answer b.

Call Price = $1,148

Current Price = $1,271.54

Semiannual Coupon = $55

Semiannual Period to Call = 8 (4 years)

Let semiannual YTM be i%

$1,271.54 = $55 * PVIFA(i%, 8) + $1,148 * PVIF(i%, 8)

Using financial calculator:

N = 8

PV = -1271.54

PMT = 55

FV = 1148

I/Y = 3.24%

Semiannual YTC = 3.24%

Annual YTC = 2*3.24 %

Annual YTC = 6.48%

Answer c.

Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC.

A firm's bonds have a maturity of 8 years with a $1,000 face
value, have an 11% semiannual coupon, are callable in 4 years at
$1,149, and currently sell at a price of $1,275.86. What is their
nominal yield to maturity? Do not round intermediate calculations.
Round your answer to two decimal places. % What is their nominal
yield to call? Do not round intermediate calculations. Round your
answer to two decimal places. % What return should investors expect
to...

A firm's bonds have a maturity of 8 years with a $1,000 face
value, have an 11% semiannual coupon, are callable in 4 years at
$1,142.41, and currently sell at a price of $1,262.12. What are
their nominal yield to maturity and their nominal yield to call? Do
not round intermediate calculations. Round your answers to two
decimal places. YTM: % YTC: % What return should investors expect
to earn on these bonds? Investors would expect the bonds to be...

A firm's bonds have a maturity of 8 years with a $1,000 face
value, have an 8% semiannual coupon, are callable in 4 years at
$1,042.10, and currently sell at a price of $1,083.62. What are
their nominal yield to maturity and their nominal yield to call? Do
not round intermediate calculations. Round your answers to two
decimal places.
YTM: _____ %
YTC: _____ %
What return should investors expect to earn on these bonds?
A) Investors would not expect...

a. A firm's bonds have a maturity of 8 years with a $1,000 face
value, have an 11% semiannual coupon, are callable in 4 years at
$1,147.06, and currently sell at a price of $1,269.68. What are
their nominal yield to maturity and their nominal yield to call? Do
not round intermediate calculations. Round your answers to two
decimal places.
YTM: ___%
YTC:___%
b. What return should investors expect to earn on these
bonds?
Investors would not expect the bonds...

A firm's bonds have a maturity of 12 years with a $1,000 face
value, have an 11% semiannual coupon, are callable in 6 years at
$1,200.96, and currently sell at a price of $1,351.36.
What is their nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
%
What is their nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal places.
%
What return should investors expect to...

A firm's bonds have a maturity of 12 years with a $1,000 face
value, have an 8% semiannual coupon, are callable in 6 years at
$1,063, and currently sell at a price of $1,118.34.
What is their nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
What is their nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal places.
What return should investors expect to earn on...

A firm's bonds have a maturity of 14 years with a $1,000 face
value, have an 11% semiannual coupon, are callable in 7 years at
$1,235, and currently sell at a price of $1,404.96. What is their
nominal yield to maturity? Do not round intermediate calculations.
Round your answer to two decimal places. 3.27 % What is their
nominal yield to call? Do not round intermediate calculations.
Round your answer to two decimal places. 5.14 % What return should
investors...

A firm's bonds have a maturity of 14 years with a $1,000 face
value, have an 11% semiannual coupon, are callable in 7 years at
$1,237.02, and currently, sell at a price of $1,406.34. What are
their nominal yield to maturity and their nominal yield to call? Do
not round intermediate calculations. Round your answers to two
decimal places. YTM: % YTC: % What return should investors expect
to earn on these bonds? Investors would expect the bonds to be...

A firm's bonds have a maturity of 12 years with a $1,000 face
value, have an 8% semiannual coupon, are callable in 6 years at
$1,065.79, and currently sell at a price of $1,124.91. What are
their nominal yield to maturity and their nominal yield to call? Do
not round intermediate calculations. Round your answers to two
decimal places.
YTM: %
YTC: %
What return should investors expect to earn on these bonds?
Investors would expect the bonds to be called and...

A firm's bonds have a maturity of 12 years with a $1,000 face
value, have an 8% semiannual coupon, are callable in 6 years at
$1,061.57, and currently sell at a price of $1,116.57. What are
their nominal yield to maturity and their nominal yield to call? Do
not round intermediate calculations. Round your answers to two
decimal places.
YTM: %
YTC: %
What return should investors expect to earn on these bonds?
Investors would expect the bonds to be called and...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 11 minutes ago

asked 14 minutes ago

asked 25 minutes ago

asked 55 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago