Question

A. An investor purchased the following five bonds. Each bond had a par value of $1,000 and a 9% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell, and each then had a new YTM of 5%. What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Enter all amounts as positive numbers. Do not round intermediate calculations. Round your monetary answers to the nearest cent and percentage answers to two decimal places.

	Price @ 9%	Price @ 5%	Percentage Change
10-year, 10% annual coupon	$	$	%
10-year zero
5-year zero
30-year zero
$100 perpetuity

B. An 8% semiannual coupon bond matures in 6 years. The bond has a face value of $1,000 and a current yield of 8.4368%. What are the bond's price and YTM? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1) Do not round intermediate calculations. Round your answer for the bond's price to the nearest cent and for YTM to two decimal places. Bond’s price: $ YTM: %

Answer 1

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BOND - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut Dr General -11AA = = = D- DA Font Wrap Text Merge & Center - U $ % , :.: Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill Sort & Find & 2 Clear Filter Select Editing Alignment Number Cells fax BS BT BU B V BW BX 9% 1000 5% 1000 Calibri E Copy Paste Format Painter BI Clipboard BS137 2 BR 122 123 124 RATE 125 PAR VALUE 126 127 128 129 130 10 year, 10% coupon 131 10 year zero 132 5 year zero 133 30 year zero 134 $100 perpetuity 135 PO P1 (P1-PO/PO price @9% price @5% percent change 10. 64.18 1386.09 30.25% [=(BT130-BS130)/BS130] 422.41 613.91 45.34% (=(BT131-BS131)/BS131] 649.93 783.53 20.56% [=(BT132-BS132)/BS132] 75.37 231.38 206.98% (=(BT133-BS133)/BS133] 1111.11 2000.00 80.00% (=(BT134-BS134)/BS134] excel formulas price @9% PV(9%,10,-100,-1000) PV(9%,10,,-1000) PV(9%,5,,-1000) PV(9%,30,,-1000) 100/0.09 price @5% PV(5%,10,-100,-1000) PV(5%, 10,,-1000) PV(5%,5,,-1000) PV(5%,30,-1000) 100/0.05 136 137 138 139 140 BANKING NOTE si S3 CLEAN PRICE 510 BIDDING, UNDERWRITING EUAC AW LIFELP, IP, MRP, INFLATION WARRANT refund 54 55 0 Sheet2 AFN Circular References 56 57 BO. 58 590 130% Ready H a é o . D w MA d DIRA. • E DEW29.m 9 . * ENG ENG 00:46 00:46

BOND - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut Σ AutoSum : A Calibri Dr General -11AA = = = B- A Wrap Text Merge & Center - B I U . Fill Clear $ -% Number E Copy Paste Format Painter Clipboard BT38 Formatting as Table Styles Styles Sort & Filter Editing Find & Select Font Alignment Cells BQ BR - BS BT BU BV BW BX BY BZ CA CB C 5 20 25 80 28 21 SEMI ANNUAL COUPON BOND 22 23 PAR VALUE 1000 24 COUPON RATE 8% COUPON ($) 26 CURRENT YIELD 8.4368% 27 YEARS PERIODS IN A YEAR 29 CURRENT YIELD = COUPON/ CURRENT PRICE 31 8.44% 80/ CURRENT PRICE 32 33 ANS BOND'S PRICE = 948.23 [80/8.4368%] 34 35 SEMI ANNUAL YTM 4.57% (=RATE(BS27*BS28,-BS25/BS28,B533,-BS23)] 36 ANS YTM 9.14% [4.57% X2] 37 38 Sheet2 AFN BANKING NOTE 51 53 CLEAN PRICE $1o BIDDING, UNDERWRITING EUAC AW LIFELP, IP, MRP, INFLATION Ready Circular References 30 WARRANT refund 54 55 56 57 58 590 0 BO 130% - 0 + 1992 * 4 OENG 24-10-2019 ODER