Question

b. 8.76% c. 7.96% d. 6.059 e. 6.699 12. You rec your brothe following 4. Thi b. Thị c. Th d. Th. e. TH 7. Assume the that you are considering the purchase of a 20-year, noncallable bond with The bond has a face value of $1,000, and it makes semian ayments. If you should be an 10.796 nominal yield to maturity on this investment, what is the maximum prices Willing to pay for the bond? a. $721.44 b. 5910.81 c. $901.80 d. 5874.74 e. S1.000.99 8. Grossnickle Corporation issued 20-year, noncallable. 7.4% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity? a. $1.281.57 b. $1,000.85 c. $1,013.05 d. $1,220.55 e. $1,196.13 - Whic a. T do b. A 9. A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 5 years from now? a. $883.61 b. $744.09 c. $976.62 d. $930.11 e. $865.00 10. Moerdyk Corporation's bonds have a 15-year maturity, a 7.25% semiannual coupon, and a par valu of $1,000. The going interest rate (ra) is 5.00%, based on semiannual compounding. What is the bond price? a. $1,235.47 b. $976.02

Answer 1

Maximum price you should be willing to pay for the bond = pv(rate,nper,pmt, fv) Where. 5.35% Rate = 10.7/2 nper = 20*2 pmt = 9.5%*1000*12 40 47.5 1000 Using excel Maximum price you should be willing to pay for the bond = pv(5.35%,40,47.50,1000) = $901.80 Hence, the correct option is [C]

Current price of the bond =pv(rate.nper.pmt fv)*-1 Where. 5.50% Rate nper pmt = 7.4%*1000 19 74 1000 Using excel Current price of the bond = pv(5.50% 19.74.1000)*-1 = $1,220.55 Hence, the correct option is [d] 9.

Using excel compute first yield to maturity rate then pv value:

A 1 Compute yield to maturity rate: 2 Current selling price of bonds (pv) 3 par value (fv) 4 Annual coupon rate 5 Annual coupon payment (pm) 6 Years to maturity (nper) 7 Yield to maturity (rate) $925 $1,000 8.50% $85 25 9.28% 9 Price 5 years from now if YTM remain same: 10 11 Yield to maturity 9.28% 12 Years left to maturity after 5 years (25-5) 13 par value $1,000 14 Annual coupon rate 8.50% 15 Annual coupon payment ($1000*8.5%) $85 16 Price 5 years from now $930.11

working as follows:

А Compute yield to maturity rate: 2 Current selling price of bonds (pv) 3 par value (fv) 4 Annual coupon rate 5 Annual coupon payment (pnt) 6 Years to maturity (nper) 7 Yield to maturity (rate) =RATE(B6,B5,-B2,B3) $925 $1,000 8.50% $85 25 =B7 Price 5 years from now if YTM remain same: 10 11 Yield to maturity 12 Years left to maturity after 5 years (25-5) 20 13 par value 1000 14 Annual coupon rate 0.085 15 Annual coupon payment ($1000*8.5%) 85 16 Price 5 years from now =PV(B11,B12,B15,B13)

Hence, the correct option is [d]

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10.

Using excel compute value as follows:

	C	D
238	Rate = 5/2	2.50%
239	nper = 15*2	30
240	pmt = 7.25%*1000*1/2	36.25
241	fv	1000
242	Bond price	$1,235.47

Working as follows:

	C	D
238	Rate = 5/2	2.50%
239	nper = 15*2	30
240	pmt = 7.25%*1000*1/2	36.25
241	fv	1000
242	Bond price	=-PV(D238,D239,D240,D241)