A coupon bond pays annual interest, has a par value of $1,000, matures in 5 (five)...

Question

Question

A coupon bond pays annual interest, has a par value of $1,000, matures in 5 (five) years, has a coupon

rate of 7.45%, and has a yield to maturity of 8.82%. The current yield on this bond is ________%. (2 decimal place)

Answer 1

Answer #1

Annual coupon=1000*7.45%=$74.5

Current price=Annual coupon*Present value of annuity factor(8.82%,5)+1000*Present value of discounting factor(8.82%,5)

=74.5*3.9078857+1000*0.655324481

=$946.461966(Approx)

Current yield=Annual coupon/Current value

=74.5/946.461966

=7.87%(Approx).

NOTE:

1.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=74.5[1-(1.0882)^-5]/0.0882

=74.5*3.9078857

2.Present value of discounting factor=1000/1.0882^5

=1000*0.655324481

Answer 2

Similar Homework Help Questions

Question 7 2 pts A coupon bond pays annual interest, has a par value of $1,000,...

Question 7 2 pts A coupon bond pays annual interest, has a par value of $1,000, matures in 5 (five) years, has a coupon rate of 7.45%, and has a yield to maturity of 8.82%. The current yield on this bond is % Do not put the % sign in your answer and round to 2 decimal points. Previous Next
4. A coupon bond that pays interest semi-annually has a par value of $1,000, matures in...

4. A coupon bond that pays interest semi-annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The value of the bond today will be rate is 8% a. $1,075.80 b.$924.16 if the coupon c. $922.78 d. $1,077.20 e. none of the above 5. A zero-coupon bond has a yield to maturity of 9% and a par value of$1,000. Ifthe bond matu in 8 years, the bond should sell for a...
A coupon bond that pays interest annually has a par value of $1,000, matures in six...

A coupon bond that pays interest annually has a par value of $1,000, matures in six years, and has a yield to maturity of 11%. The intrinsic value of the bond today will be ________ if the coupon rate is 7.5%. A) $886.28 B) $851.93 C) $1,123.01 D) $1,000.00 E) $712.99

A coupon bond that pays interest of $55 annually has a par value of $1,000, matures...

A coupon bond that pays interest of $55 annually has a par value of $1,000, matures in 5 years, and is selling today at a $74.00 discount from par value. The current yield on this bond is _________.
A coupon bond that pays interest of $60 annually has a par value of $1,000, matures...

A coupon bond that pays interest of $60 annually has a par value of $1,000, matures in 5 years, and is selling today at $883.31. What is the yield to maturity for this bond? a. 6% b. 7% c. 8% d. 9%
A coupon bond which pays interest of $60 annually, has a par value of $1,000, matures...

A coupon bond which pays interest of $60 annually, has a par value of $1,000, matures in 5 years, and is selling today at a 584.52 discount from par value. The approximate yield to maturity on this bond is A6% B. 7% C. 8% D. 9% For a discount bond, its coupon rate is_than its yield to maturity and its price is expected to ___over the years. A B. C. D. Greater; increase Greater; decrease Lower; increase Lower; decrease A...

A bond that matures in 13 years has a $1,000 par value. The annual coupon interest...

A bond that matures in 13 years has a $1,000 par value. The annual coupon interest rate is 8 percent and the market's required yield to maturity on a comparable-risk bond is 16 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually?
A bond that matures in 13 years has a $1,000 par value. The annual coupon interest...

A bond that matures in 13 years has a $1,000 par value. The annual coupon interest rate is 7 percent and the markets required yield to maturity on a comparable risk bond is 15 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually?
Today you purchase a coupon bond that pays an annual interest, has a par value of...

Today you purchase a coupon bond that pays an annual interest, has a par value of $1,000, matures in six years, has a coupon rate of 10%, and has a yield to maturity of 8%. One year later, you sell the bond after receiving the first interest payment and the bond's yield to maturity had changed to 7%. Your annual total rate of return on holding the bond for that year is ?

A coupon bond that pays interest annually has a market value equal to its par value...

A coupon bond that pays interest annually has a market value equal to its par value of $1,000. It matures in five years, and has a coupon rate of 9%. The yield to maturity on this bond is what?