Question

Suppose you hold a 6.5 percent coupon bond with a par value of $100 that matures in 14 years and pays semi-annual coupons. 1) If currently, the bond is priced to offer a yield to maturity of 7.2 percent, what is its current selling price? 2) You believe that in one year, the yield to maturity will be 6.8 percent. a. Wil the bond price increase or decrease from its current market value? Explain why. (No Calculations required) b. Will the price be higher or lower than $100? Explain why. (No calculations required) If you hold the bond for the entire year and the change in yield to maturity occurs, what would 3) be your total return in dollars and percentage?

Answer 1

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Home nert Page Layout Formulas Data Review View dd-Ins s Cut ta copy ▼ Σ AutoSum ー E " ゴWrap Text ,_a. ars-函Merge & Center, $, % , 弼,8 C Paste B l u. Conditional Format CeInsert Delete Format Formatting, as Table w styles. ▼ ㆆ ▼ Sort &Find & 2 ClearFe Select Edting Format Painter Clipboard Font Alignment Number Styles Cells AT AU AV AW AX AY AZ BA BC BD BE BF BG 78 79 80 81 82 83 84 85 86 87 IF YOU HOLD BOND FOR A YEAR PURCHASE PRICE (PO)- COUPON- 6.5% OF 100- YTM IN A YEAR years PRICE IN A YEAR (P1)- 93.89 6.5 C1 6.80% semi-annual 13 97.44 [ EXCEL PV(AY81/2,AY82*2,-AY64 100/2,-100)] TOTAL RETURN IN DOLLARS = TOTAL RETURN IN % P1 + C1-PO-97.44 +6.5-93.89-10.05 (P1 + C1 - PO/PO- 10.70% 89 90 91 92 93 94 95 (4 トト , NOTE BIDDING, UNDERWRITING . . EUAC AW PM LIFE / LP, lp, MRP, INFLATION YIELD ( WARRANTrefund bond . CLEAN INVOICE PRICE Sheet1 Sheet3 Sheet4 21:27 16-01-2019