Question

Weismann Co. issued 11-year bonds a year ago at a coupon rate of 10 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 10 percent, what is the current bond price?

Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 8 years to maturity, and a coupon rate of 6 percent paid annuallly. If the yield to maturity is 10 percent, what is the current price of the bond?

Suppose the real rate is 10 percent and the inflation rate is 1.8 percent. What rate would you expect to see on a Treasury bill?

Gabriele Enterprises has bonds on the market making annual payments, with 11 years to maturity, a par value of $1,000, and selling for $880. At this price, the bonds yield 11 percent. What must the coupon rate be on the bonds?

Answer 1

1	Current bond price	$1,000.00
2	Current bond price	$786.60
3	(1 + nominal rate) = (1 + real rate) x (1 + inflation rate)
	Nominal rate = (1+10%)*(1+1.8%)-1	11.98%
4	Coupon amount	$90.67
	Coupon rate	9.07%

Working

Book1 - Excel Sign in File Home Insert Page Layout Formulas Data Review View Help Il me what you want to do = = der ab General Calibri 11 A A E BI U - - BA Insert * Delete- Format Paste Conditional Format as Cell Formatting Table Styles Styles Sort & Filter Editing Clipboard F Font Alignment Number Cells C2 fr Current bond price В 1 1 Current bond price --PV(10%/2,10*2,10%*1000/2,1000) 2 Current bond price =-PV(10%,8,6%*1000,1000) nm two ooo 3 (1 + nominal rate) = (1 + real rate) x (1 + inflation rate) Nominal rate = (1+10%)*(1+1.8%)-1 =(1+10%)*(1+1.8%)-1 4 Coupon amount Coupon rate =PMT(11%,11,-880,1000) =D9/1000 12 13 14 15