BONDS VALUATIONS PRACTICE 1. A bond maturing in 20 years at a par value of $1,000...

Free

60.1K

Verified Solution

Question

Finance

BONDS VALUATIONS PRACTICE
1. A bond maturing in 20 years at a par value of $1,000 has acoupon rate of 6% and current yield of 8%. Is this a discount bondor a premium bond? What is the price of the bond?
2. A bond maturing in 15 years at a par value of $1,000 has acoupon rate of 4% and current yield of 3%. Is this a discount bondor a premium bond? What is the price of the bond?
3. A bond maturing in 10 years at a par value of $1,000 has acoupon rate of 9% and current market price of $1,145.68. What isthe bond’s annual yield?
4. A bond maturing in 15 years at a par value of $1,000 has acoupon rate of 5%. If the current interest rate is 4%, what is theprice of the bond?
5. A bond maturing in 15 years at a par value of $1,000 has acoupon rate of 7% and current market price of $1,140.95. If thebond is callable after 5 years at $1,050, what is the bond’s yieldto call? (Hint: Click on YTC tab in the Bond Calculator app).

Answer & Explanation Solved by verified expert

4.2 Ratings (732 Votes)

current yield = coupon rate*par value/current price

8=(6/100)*1000/Bond price

Bond price = 750

Bond is a discount bond as price is less than par value

current yield = coupon rate*par value/current price

3=(4/100)*1000/Bond price

Bond price = 1333.33

Bond is a premium bond as price is more than par value

K = N

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

k=1

K =10

1145.68 =? [(9*1000/100)/(1 + YTM/100)^k] + 1000/(1 + YTM/100)^10

k=1

YTM% = 6.93

Please ask remaining parts seperately, questions are unrelated and not sub parts... I have done 2 bonus

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

BONDS VALUATIONS PRACTICE1. A bond maturing in 20 years at a par value of $1,000 has acoupon rate of 6% and current yield of 8%. Is this a discount bondor a premium bond? What is the price of the bond?2. A bond maturing in 15 years at a par value of $1,000 has acoupon rate of 4% and current yield of 3%. Is this a discount bondor a premium bond? What is the price of the bond?3. A bond maturing in 10 years at a par value of $1,000 has acoupon rate of 9% and current market price of $1,145.68. What isthe bond’s annual yield?4. A bond maturing in 15 years at a par value of $1,000 has acoupon rate of 5%. If the current interest rate is 4%, what is theprice of the bond?5. A bond maturing in 15 years at a par value of $1,000 has acoupon rate of 7% and current market price of $1,140.95. If thebond is callable after 5 years at $1,050, what is the bond’s yieldto call? (Hint: Click on YTC tab in the Bond Calculator app).