Question

1.

Staind, Inc., has 7 percent coupon bonds on the market that have 5 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 11 percent, what is the current bond price?

2.

Kiss the Sky Enterprises has bonds on the market making annual payments, with 6 years to maturity, and selling for $870. At this price, the bonds yield 11.0 percent. What must the coupon rate be on the bonds?

Answer 1

I will solve this question using Excel as well as Financial Calculator.

Considering Face Value = $1000

Financial Calculator:

1)

PMT = 0.07*1000 = 70

N = 5 (5 years left to maturity)

I/Y = 11%

FV = 1000

CPT -> PV

PV = - 852.16 Answer

2)

N = 6

PV = -870

I/Y = 11%

FV = 1000

CPT -> PMT

PMT = 79.27

Coupon Rate = (79.27/1000)*100 = 7.93% Answer

Using Excel:

Please let me know in case you have any queries and I will be happy to assist you.