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a $1,000 par value bond that pays interest annually just paid $113 in interest
- a $1,000 par value bond that pays interest annually just paid $113 in interest. what is the coupon rate ?
- A 08.40% coupon, 6 year annual bond is priced at $854. what is the current yield for this bond?
- .what is the price of a $1,000 par value, semi annual coupon with 12 years to maturity, a coupon rate of 11.00% and yield to maturity of 04.40%.?
- what is the price of a $1,000 par value, 16 year annual coupon bond with a 07.20% coupon rate and a yield to maturity of 03.30%?
- you bought a 19 year, 07.60% semi annual coupon bond today and the current market rate of return is 06.70%. The bond is callable in 5 years with a $82 call premium. what price did you pay for the bond?
- ..a 03.90% annual coupon 9-year bond has a yield to maturity of 09.60%. Assuming the par value is $1,000 and the YTM is expected not to change over the next year;
a. what should the price of the bond be today?
b what is the bond price expected to be in one year?
c what is the expected Capital Gains yield for this bond?
d. what is the expected Current Yield for this bond?
Expert Solution
1). Computation of the coupon rate:-
Coupon rate = Coupon payment / Par value
= $113 / $1,000
= 11.30%
2). Computation of the current yield of the bond:-
Current yield = Annual coupon payment / Current price of the bond
= $1,000*8.40% / $854
= $84 / $854
= 9.84%
3). We can calculate the price of the bond by using the following formula in excel:-
=-pv(rate,nper,pmt,fv)
Here,
PV = Price of the bond
Rate = 4.40%/2 = 2.20% (semiannual)
Nper = 12*2 = 24 periods (semiannual)
Pmt = Coupon payment = $1,000*11%/2 = $55
FV = $1,000
Substituting the values in formula:
= -pv(2.20%,24,55,1000)
= $1,610.25
4). We can calculate the price of the bond by using the following formula in excel:-
=-pv(rate,nper,pmt,fv)
Here,
PV = Price of the bond
Rate = 3.30%
Nper = 16 periods
Pmt = Coupon payment = $1,000*7.20% = $72
FV = $1,000
Substituting the values in formula:
= -pv(3.30%,16,72,1000)
= $1,478.83
5). We can calculate the price of the bond by using the following formula in excel:-
=-pv(rate,nper,pmt,fv)
Here,
PV = Price of the bond
Rate = 6.70%/2 = 3.35% (semiannual)
Nper = 5*2 = 10 periods (semiannual)
Pmt = Coupon payment = $1,000*7.60%/2 = $38
FV = $1,000 + $82 = $1,082
Substituting the values in formula:
= -pv(3.35%,10,38,1082)
= $1,096.69
6-a). We can calculate the price of the bond today by using the following formula in excel:-
=-pv(rate,nper,pmt,fv)
Here,
PV = Price of the bond today
Rate = 9.60%
Nper = 9 periods
Pmt = Coupon payment = $1,000*3.90% = $39
FV = $1,000
Substituting the values in formula:
= -pv(9.60%,9,39,1000)
= $666.45
b). We can calculate the price of the bond in one year by using the following formula in excel:-
=-pv(rate,nper,pmt,fv)
Here,
PV = Price of the bond in one year
Rate = 9.60%
Nper = 9-1 = 8 periods
Pmt = Coupon payment = $1,000*3.90% = $39
FV = $1,000
Substituting the values in formula:
= -pv(9.60%,8,39,1000)
= $691.43
c). Computation of the capital gains yield:-
Capital gains yield = ($691.43 - $666.45) / $666.45
= $24.98 / $666.45
= 3.75%
d). Computation of the current yield:-
Current yield = Annual coupon payment / Current price of the bond
= $1,000 * 3.90% / $666.45
= 5.85%
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