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1. A issued an unsecured bond with a 10% coupon rate paid semiannually. The bond matures...

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Finance

1. A issued an unsecured bond with a 10% coupon rate paidsemiannually. The bond matures in 8 years, has a par value of$1,000, and a yield to maturity of 8.5%. Based on this information,what is the price of this bond?

2. B issued a bond that will mature in 10 years. The bond has aface value of $1,000 and a coupon rate of 8%, paid semiannually.The bond is currently trading at $1,100, and is callable in 5 yearsat a call price of $1,050. What is the bond’s yield to call(YTC)?

3. C issued a $1,000 par, 8%, 10 year bond, which payssemiannual coupons. The bond is callable in 5 years at a call priceof $1,050. If the current price of the bond is $1,100, what is itsyield to maturity (YTM)?

Detailed Calculation process please!

Answer & Explanation Solved by verified expert
3.7 Ratings (497 Votes)

1

                  K = Nx2
Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =8x2
Bond Price =? [(10*1000/200)/(1 + 8.5/200)^k]     +   1000/(1 + 8.5/200)^8x2
                   k=1
Bond Price = 1085.8

2

                  K = Time to callx2
Bond Price =? [(Semi Annual Coupon)/(1 + YTC/2)^k]     +   Call Price/(1 + YTC/2)^Time to callx2
                   k=1
                  K =5x2
1100 =? [(8*1000/200)/(1 + YTC/200)^k]     +   1050/(1 + YTC/200)^5x2
                   k=1
YTC% = 6.49

3

                  K = Nx2
Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =10x2
1100 =? [(8*1000/200)/(1 + YTM/200)^k]     +   1000/(1 + YTM/200)^10x2
                   k=1
YTM% = 6.62

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1. A issued an unsecured bond with a 10% coupon rate paidsemiannually. The bond matures in 8 years, has a par value of$1,000, and a yield to maturity of 8.5%. Based on this information,what is the price of this bond?2. B issued a bond that will mature in 10 years. The bond has aface value of $1,000 and a coupon rate of 8%, paid semiannually.The bond is currently trading at $1,100, and is callable in 5 yearsat a call price of $1,050. What is the bond’s yield to call(YTC)?3. C issued a $1,000 par, 8%, 10 year bond, which payssemiannual coupons. The bond is callable in 5 years at a call priceof $1,050. If the current price of the bond is $1,100, what is itsyield to maturity (YTM)?Detailed Calculation process please!

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