Question

Suppose Ford sold an issue of bonds with a 17-year maturity, a $1500 par value, a 12% coupon rate, and semiannual interest payments. (a) Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 7%. At what price would the bonds sell? Sell price = $ (keep 2 decimal places) (b) Suppose that, two years after the bonds' issue, the going interest rate had risen to 15%. At what price would the bonds sell? Sell price = $ (keep 2 decimal places) (c) Today, the closing price of the bond is $783.58 What is the current yield? Current yield (annually) =

Answer 1

rate positively ..

ans a)
	We have to use financial calculator to solve this
	put in calculator -
	FV		1500
	PMT	1500*12%/2	90
	I	7%/2	3.50%
	N	17*2	34
	Compute PV	($2,239.04)
	Ans =		$2,239.04
ans b)
	We have to use financial calculator to solve this
	put in calculator -
	FV		1500
	PMT	1500*12%/2	90
	I	15%/2	7.50%
	N	15*2	30
	Compute PV	($1,234.53)
	Ans =		$1,234.53
ans c)	Current yield = Annual coupon payment/Current price
			22.97%