1. A bond with 10 years to maturity has a face value of $1,000. The bond...

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1. A bond with 10 years to maturity has a face value of $1,000.The bond can be called in four years for $1050. The bond pays an 6percent semiannual coupon, and the bond has a 3.3 percent nominalyield to maturity.  What is the price of the bond todayassuming that it will be called?
2.
A corporate bond that matures in 12 years pays a 9 percentannual coupon, has a face value of $1,000, and a current price of980. The bond can first be called four years fromnow.  The call price is $1,050.  What is thebond’s yield to call?
a.         10.01%
b.         5.36%
c.         10.71%
d.         11.86%
e.         None ofthe above
3.
You just purchased a $1,000 par value, 9-year, 7 percent annualcoupon bond that pays interest on a semiannualbasis.  The bond sells for $920. What is the bond’snominal yield to maturity?
a.         7.28%
b.         8.28%
c.         9.60%
d.         8.67%
e.         4.13%
f.          Noneof the above

Answer & Explanation Solved by verified expert

3.9 Ratings (372 Votes)

K = Nx2

Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2

k=1

K =10x2

Bond Price =? [(6*1000/200)/(1 + 3.3/200)^k] + 1000/(1 + 3.3/200)^10x2

k=1

Bond Price = 1228.39

K = Time to call

Bond Price =? [(Semi Annual Coupon)/(1 + YTC)^k] + Call Price/(1 + YTC)^Time to call

k=1

K =4

980 =? [(9*1000/100)/(1 + YTC/100)^k] + 1050/(1 + YTC/100)^4

k=1

YTC% = 10.71

K = Nx2

Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2

k=1

K =9x2

920 =? [(7*1000/200)/(1 + YTM/200)^k] + 1000/(1 + YTM/200)^9x2

k=1

YTM% = 8.28

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1. A bond with 10 years to maturity has a face value of $1,000.The bond can be called in four years for $1050. The bond pays an 6percent semiannual coupon, and the bond has a 3.3 percent nominalyield to maturity. What is the price of the bond todayassuming that it will be called?2.A corporate bond that matures in 12 years pays a 9 percentannual coupon, has a face value of $1,000, and a current price of980. The bond can first be called four years fromnow. The call price is $1,050. What is thebond’s yield to call?a. 10.01%b. 5.36%c. 10.71%d. 11.86%e. None ofthe above3.You just purchased a $1,000 par value, 9-year, 7 percent annualcoupon bond that pays interest on a semiannualbasis. The bond sells for $920. What is the bond’snominal yield to maturity?a. 7.28%b. 8.28%c. 9.60%d. 8.67%e. 4.13%f. Noneof the above