Question

« CENGAGE MINDTAP Assignment 07- Bonds and Their Valuation Coupon payments are fixed, but the percentage return that investors receive varies based on market condtions. This percentage return is referred to as the bond yield of retum expected from a bond held until its maturity date. However, the YTM der certain assumptions. Which of the following is one of those assumptions? Yield to maturity (TM) is that equals the expected rate The band has an The bond will not on feature Consider the case of Eades Corp.: Eades Corp. has 9% annual coupon bonds that are collable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $950.35. However, Eades Corp. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (UTC) on Eades Corp's bonds? If interest rates are expected to remain constant, what is the best estimate of the remaining life left for Eades Corp.'s bonds? O 18 years O 10 years O 5 years O 8 years If Eades Corp. issued new bonds today, what coupon rate must the bonds have to be issued at par? ch TI

Answer 1

a) The bonds will not be called

b)

YTM:-

=RATE(nper,pmt,pv,fv)

=RATE(18,9%*1000,-950.35,1000)

=9.59%

YTC:-

=RATE(8,9%*1000,-950.35,1060)

=10.46%

c)

18 years