I am very confused about how to work this problem. I don't have a lot of...
I am very confused about how to work this problem. I don't have a lot of experience using formulas in Excel.
This bond is a 20-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040. The bond sells for $1,100. (Assume that the bond has been issued.) She needs you to complete the partial model for her. She needs the following to be answered.
- What is the bond's yield to maturity?
I can see that others have posted the answer of:
Periodic YTM = 3.53
Annualized Nominal YTM = 7.06
But I need to understand how they got that answer.
- What is the bond's current yield?
- What is the bond's capital gain or loss yield?
- What is the bond's yield to call?
- How would the price of the bond be affected by a change in the going market interest rate? (Hit: Conduct a sensitivity analysis of price to changes in the going market rate for the bond. Assume the bond will be called if and only if the going rate of interest falls below the coupon rate. This is an oversimplification, but assume it for the purpose of this problem.)
- Now assume the date is October 25, 2014. Assume further that a 12%, 10-year bond was issued on July 1, 2017, pays interest semiannually (on January 1 and July 1), and sells for $1,00. Use the attached spreadsheet to find the bond's yield.
Homework Answers
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I am very confused
about how to work this problem. I don't have a lot of...
Your boss is back. This time he/she provides you a partial model to a bond valuation....
Your boss is back. This time
he/she provides you a partial model to a bond valuation. This bond
is a 20-year, 8% semiannual coupon bond with a par value of $1,000
may be called in 5 years at a call price of $1,040. The bond sells
for $1,100. (Assume that the bond has been issued.) She needs you
to complete the partial model for her. She needs the following to
be answered. What is the bond's yield to maturity? What...
Your boss is back. This time he/she provides you a partial model to a bond valuation....
Your boss is back.
This time he/she provides you a partial model to a bond valuation.
This bond is a 20-year, 8% semiannual coupon bond with a par value
of $1,000 may be called in 5 years at a call price of $1,040. The
bond sells for $1,100. (Assume that the bond has been issued.) She
needs you to complete the partial model for her. She needs the
following to be answered.
What is the bond's yield to
maturity?
What...
Your boss is back. This time he/she provides you a partial model to a bond valuation....
Your boss is back. This time he/she provides you a partial model
to a bond valuation. This bond is a 20-year, 8% semiannual coupon
bond with a par value of $1,000 may be called in 5 years at a call
price of $1,040. The bond sells for $1,100. (Assume that the bond
has been issued.) She needs you to complete the partial model for
her. She needs the following to be answered.
What is the bond's yield to maturity?
What...
Your boss is back. This time he/she provides you a partial model to a bond valuation....
Your boss is back. This time he/she provides you a partial model
to a bond valuation. This bond is a 20-year, 8% semiannual coupon
bond with a par value of $1,000 may be called in 5 years at a call
price of $1,040. The bond sells for $1,100. (Assume that the bond
has been issued.) She needs you to complete the partial model for
her. She needs the following to be answered.
What is the bond's yield to maturity?
What...
A 20 year, 8% semi-annual coupon bond with a par value of $1,000 may be called...
A 20 year, 8% semi-annual coupon bond with a
par value of $1,000 may be called in 10
years at a call price of $1,100. The bond sells for
$1,200.
e. How would the price of
the bond be affected by a change in the going market interest
rates?
Please show work ( by adding numbers or CELL with
formula if needed). Thank you, will rate.
L M N I e a A 20 year, 8% semi-annual coupon bond with...
A 20-year, 8% semiannual coupon bond with a par value of $1,000 may be called in...
A 20-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040. The bond sells for $1,100. (Assume that the bond has just been issued.) Basic Input Data: Years to maturity: 20 Periods per year: 2 Periods to maturity: Coupon rate: 8% Par value: $1,000 Periodic payment: Current price $1,100 Call price: $1,040 Years till callable: 5 Periods till callable: a. What is the bond's yield to maturity?...
A 20-year, 8% semiannual coupon bond with a par value of $1,000 may be called in...
A
20-year, 8% semiannual coupon bond with a par value of $1,000 may
be called in 5 years at a call price of $1,040. The bond sells for
$1,100. (Assume that the bond has just been issued.)
Basic Input Data:
Years to maturity:
20
Periods per year:
2
Periods to maturity:
40
Coupon rate:
8%
Par value:
$1,000
Periodic payment:
$80
Current price
$1,100
Call price:
$1,040
Years till callable:
5
Periods till callable:
10
e. How would the price...
7.4 Unlike the coupon interest rate, which is fixed, a bond's yield varies from day to...
7.4
Unlike the coupon interest rate, which is fixed, a bond's yield varies from day to day depending on market conditions. To be most useful, it should give us an estimate of the rate of return an investor would earn if that investor purchased the bond today and held it for its remaining life. There are three different yield calculations: Current yield, yield to maturity, and yield to call. A bond's current yield is calculated as the annual interest payment...
I am trying to do this problem but i am confused and need help understnading how...
I am trying to do this problem but i am confused and need help
understnading how to do it on a ti 84 calculator.
7-5 BOND VALUATION An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 11% annual coupon. Bond L matures in 12 years, while Bond S matures in 1 year. a. What will the value of each bond be if the going interest rate is 6%, 8%, and 12%?...
1. Bond A sells at a premium, so the YTM must be less than the coupon...
1. Bond A sells at a premium, so the YTM must be less than the coupon rate. Assume the required rate of return remains constant when we're trying to determine the likelihood of a call being made. If the YTM stays less than the 9% coupon rate, then 5 years from now when the call protection ends, the bond issuer will call the bond, pay the call premium, and refinance with new bonds at lower market rates. Thus, the market...
Your boss is back. This time
he/she provides you a partial model to a bond valuation. This bond
is a 20-year, 8% semiannual coupon bond with a par value of $1,000
may be called in 5 years at a call price of $1,040. The bond sells
for $1,100. (Assume that the bond has been issued.) She needs you
to complete the partial model for her. She needs the following to
be answered. What is the bond's yield to maturity? What...
Your boss is back.
This time he/she provides you a partial model to a bond valuation.
This bond is a 20-year, 8% semiannual coupon bond with a par value
of $1,000 may be called in 5 years at a call price of $1,040. The
bond sells for $1,100. (Assume that the bond has been issued.) She
needs you to complete the partial model for her. She needs the
following to be answered.
What is the bond's yield to
maturity?
What...
Your boss is back. This time he/she provides you a partial model
to a bond valuation. This bond is a 20-year, 8% semiannual coupon
bond with a par value of $1,000 may be called in 5 years at a call
price of $1,040. The bond sells for $1,100. (Assume that the bond
has been issued.) She needs you to complete the partial model for
her. She needs the following to be answered.
What is the bond's yield to maturity?
What...
Your boss is back. This time he/she provides you a partial model
to a bond valuation. This bond is a 20-year, 8% semiannual coupon
bond with a par value of $1,000 may be called in 5 years at a call
price of $1,040. The bond sells for $1,100. (Assume that the bond
has been issued.) She needs you to complete the partial model for
her. She needs the following to be answered.
What is the bond's yield to maturity?
What...
A 20 year, 8% semi-annual coupon bond with a
par value of $1,000 may be called in 10
years at a call price of $1,100. The bond sells for
$1,200.
e. How would the price of
the bond be affected by a change in the going market interest
rates?
Please show work ( by adding numbers or CELL with
formula if needed). Thank you, will rate.
L M N I e a A 20 year, 8% semi-annual coupon bond with...
A
20-year, 8% semiannual coupon bond with a par value of $1,000 may
be called in 5 years at a call price of $1,040. The bond sells for
$1,100. (Assume that the bond has just been issued.)
Basic Input Data:
Years to maturity:
20
Periods per year:
2
Periods to maturity:
40
Coupon rate:
8%
Par value:
$1,000
Periodic payment:
$80
Current price
$1,100
Call price:
$1,040
Years till callable:
5
Periods till callable:
10
e. How would the price...
7.4
Unlike the coupon interest rate, which is fixed, a bond's yield varies from day to day depending on market conditions. To be most useful, it should give us an estimate of the rate of return an investor would earn if that investor purchased the bond today and held it for its remaining life. There are three different yield calculations: Current yield, yield to maturity, and yield to call. A bond's current yield is calculated as the annual interest payment...
I am trying to do this problem but i am confused and need help
understnading how to do it on a ti 84 calculator.
7-5 BOND VALUATION An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 11% annual coupon. Bond L matures in 12 years, while Bond S matures in 1 year. a. What will the value of each bond be if the going interest rate is 6%, 8%, and 12%?...
1. Bond A sells at a premium, so the YTM must be less than the coupon rate. Assume the required rate of return remains constant when we're trying to determine the likelihood of a call being made. If the YTM stays less than the 9% coupon rate, then 5 years from now when the call protection ends, the bond issuer will call the bond, pay the call premium, and refinance with new bonds at lower market rates. Thus, the market...
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