One More Time Software has 9.4 percent coupon bonds on the market with 19 years to maturity. The bonds make semiannual payments and currently sell for 96.2 percent of par. |
Required: |
(a) | What is the current yield on the bonds? |
(Click to select)0.20%9.77%0.10%10.76%10.26% |
(b) | The YTM? |
(Click to select)9.84%9.71%9.90%4.92%10.02% |
(c) | The effective annual yield? |
(Click to select)10.08%9.81%10.59%9.58%0.10% |
Answer:
Given Coupon Rate =9.4%
Years to Maturity =19 year
n=2*19=38
Let Par value P=$100
Current Value A =$96.2
Coupon payment C=(100*9 4%)/2=9.4/2=$4.7 per semi annual
A) Option C:9.77%
Current Yield =semi annual coupon payment/bond's current price
Current yield = 4.7/96.2=4.89% per semiannual
Nominal current yield=2*4.89%=9.78% per annum
B) Option A: 9.84%
let YTM=2*r per annum
r= YTM per semiannual
So for YTM
So solving for r=4.92%
So YTM =2*4.92%=9.84%
C) option A:10.08%
Effective annual yield =(1+current yield semi annual)^2 -1
Effective annual yield =(1+4.89%)^2 -1=10.02% per annum
One More Time Software has 9.4 percent coupon bonds on the market with 19 years to...
One More Time Software has 7.2 percent coupon bonds on the market with 17 years to maturity. The bonds make semiannual payments and currently sell for 84.5 percent of par. Required: (a) What is the current yield on the bonds? (Click to select) 8.95% 0.09% 8.52% 0.19% 9.45% (b) The YTM? (Click to select) 8.87% 9.18% 7.70% 4.50% 9.00% (c) The effective annual yield? (Click to select )9.20% 8.74% 0.09% 9.66% 8.97%
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