Question

Module 3 Bond Valuation Worksheet – Complete in Excel.

Please answer the following questions.

1. Renfro Rentals has issued bonds that have an 7% coupon rate, payable semiannually. The bonds mature in 10 years, have a face value of $1,000, and a yield to maturity of 8%. What is the price of the bonds?

2. Thatcher Corporation’s bonds will mature in 30 years. The bonds have a face value of $1,000 and an 7% coupon rate, paid semiannually. The price of the bonds is $1,550. The bonds are callable in 5 years at a call price of $1,450. What is their yield to maturity? What is their yield to call?

3. A 14-year, 14% semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,030. The bond sells for $1,150. (Assume that the bond has just been issued.)

a. What is the bond’s yield to maturity?

b. What is the bond’s current yield?

c. What is the bond’s capital gain or loss yield?

d. What is the bond’s yield to call?

4. A bond trader purchased each of the following bonds at a yield to maturity of 11%. Immediately after she purchased the bonds, interest rates fell to 9%. What is the percentage change in the price of each bond after the decline in interest rates? Fill in the following table:

Price @ 11%​Price @ 9%​Percentage Change

10-year, 10% annual coupon

10-year zero

5-year zero

30-year zero

Perpetuity, $100 annual coupon

5. An investor has two bonds in his portfolio. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity equal to 9.6%. One bond, Bond C, pays an annual coupon of 10%, the other bond, Bond Z, is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years, what will be the price of each of the bonds at the following time periods? Fill in the following table:

Time​​Price of Bond C​​Price of Bond Z

6. Jackson Corporation’s bonds have 16 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 12%. The bonds have a yield to maturity of 13%. What is the current market price of these bonds?

7. Wilson Corporation’s bonds have 18 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value and the coupon interest rate is 11%. The bonds sell at a price of $880. What is their yield to maturity?

Answer 1

As per rules I am answering the first 4 subparts of the question

Answers as per excel:

1	Price	$932.05
2	YTM	3.88%
	YTC	3.32%
3a	YTM	11.79%
3b	Current yield	12.17%

WORKINGS