Question

Keyser Materials has 6.5 percent coupon bonds on the market with 15 years to maturity. The bonds make semiannual payments and currently sell for 102 percent of par. What is the current yield? The YTM? The effective annual yield?

• 1. 6.37 percent; 6.29 percent; 6.39 percent

• 2. 7.84 percent; 7.92 percent; 7.95 percent

• 3. 7.84 percent; 7.92 percent; 7.97 percent

• 4. 7.80 percent; 7.84 percent; 7.92 percent

• 5. 7.80 percent; 7.92 percent; 6.39 percent

Answer 1

COUPON RATE 6.50% 15 YEARS TO MATURITY NPER 30 (years to maturity x 2) PMT 3 2.5 (face value x coupon rate)/2 FACE VALUE $1,000.00 PRICE = PV = $1,020.00 RATE = 3.15% rate(nper,pmt,-pv,fv) rate(30,32.5,-1020, 1000) YIELD = RATE X 2 = 6.29% (3.15%*2) Current yield 6.37% [65/1020 ] Yield to maturity 6 .29% Effective annual YTM = 6.39% ((1+6.29%/2)^2 - 1]