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Q25) What is the price of a 1,000 par value semi-annual bond with 17
Q25) What is the price of a 1,000 par value semi-annual bond with 17.0 years to maturity and a coupon rate of 7.29% and a yield-to-maturity of 8.58% ? (1.5 points)
Q26) What is the price of a 1,000 par value, 5.0-year, annual bond with a 3.81% coupon rate and a yield to maturity of 7.50% ? (1.5 points)
)24) An 9.49% coupon, 19.0 -year annual bond is priced at P 041.00 . What is the current yield for this bond? (1.5 points)
027) You bought a 26.0-year, 4.12% semi-annual coupon bond today and the current market rate of return is 3.52%. The bond is callable in 4.0 years with a $86.00 call premium_ What price did you pay for your bond? (2.0 points)H-?j
028) A 5.62% coupon, 14.0 -year annual bond has a yield to maturity of 4.26% Assuming the par value is 1,000 and the YTM does not change over the next year, Compute the following: a) Price of the bond today (1 point): b) Price of the bond in one year (1 point): c) Capital gains yield (1 point): d) Current Yield (1 point):
Expert Solution
24) Computation of Current Yield:
Current Yield = Annual Coupon/Current Bond Price
= $1000*9.49% / $1,041
= $94.90/$1,041
Current Yield = 9.12%
25) Computation of Price of Bond using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Price of Bond = ?
Rate = 8.58%/2 = 4.29% compounded semiannually
Nper = 17 years*2 = 34 Periods
PMT = 1,000*7.29%/2 = $36.45
FV = 1,000
Substituting the values in formula:
=-pv(4.29%,34,36.45,1000)
PV or Price of Bond = $885.70
26) Computation of Current Price of Bond using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Price of Bond = ?
Rate = 7.50%
Nper = 5 years
PMT = 1,000*3.81% = $38.10
FV = 1,000
Substituting the values in formula:
=-pv(7.5%,5,38.10,1000)
PV or Current Price of Bond = $850.71
27) Computation of Price of Bond using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Price of Bond = ?
Rate = 3.52%/2 = 1.76% compounded semiannually
Nper = 4 years*2 = 8 Periods
PMT = 1,000*4.12%/2 = $20.60
FV = 1,000+86 = 1,086
Substituting the values in formula:
=-pv(1.76%,8,20.60,1086)
PV or Price of Bond = $1,097
28)
a) Computation of Current Price of Bond using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Price of Bond = ?
Rate = 4.26%
Nper = 14 years
PMT = 1,000*5.62% = $56.20
FV = 1,000
Substituting the values in formula:
=-pv(4.26%,14,56.20,1000)
PV or Current Price of Bond = $1,141.22
b) Computation of Price of Bond in One Year using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Price of Bond = ?
Rate = 4.26%
Nper = 14 years - 1 year = 13 years
PMT = 1,000*5.62% = $56.20
FV = 1,000
Substituting the values in formula:
=-pv(4.26%,13,56.20,1000)
PV or Price of Bond in One Year = $1,133.64
c) Computation of Capital Gain Yield:
Capital Gain Yield = (P1 - P0)/P0
= (1,133.64-1,141.22)/1,141.22
Capital Gain Yield = -0.665%
d) Computation of Current Yield:
Current Yield = Annual Coupon / Current Bond Price
= $56.20/$1,141.22
Current Yield = 4.92%
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