Question

Today, a bond has a coupon rate of 8.86 percent, par value of 1,000 dollars, YTM of 9.46 percent, and semi-annual coupons with the next coupon due in 6 months. One year ago, the bond's price was 1,069.83 dollars and the bond had 11 years until maturity. What is the current yield of the bond today? Answer as a rate in decimal format so that 12.34% would be entered as.1234 and 0.98% would be entered as .0098. Number One year ago, a bond had a coupon rate of 8.1 percent, par value of $1000, YTM of 7.96 percent, and semi-annual coupons. Today, the bond's price is 970.47 and the bond has 10 years until maturity. What was the current yield of the bond one year ago? The next coupon is due in 6 months. Answer as a rate in decimal format so that 12.34% would be entered as 1234 and 0.98% would be entered as .0098. Number

Answer 1

Answer to Question 1:

Par Value = $1,000

Annual Coupon Rate = 8.86%
Annual Coupon = 8.86% * $1,000
Annual Coupon = $88.60

Semiannual Coupon = Annual Coupon / 2
Semiannual Coupon = $88.60 / 2
Semiannual Coupon = $44.30

Annual YTM = 9.46%
Semiannual YTM = 4.73%

Time to Maturity = 10 years
Semiannual Period = 20

Current Price = $44.30 * PVIFA(4.73%, 20) + $1,000 * PVIF(4.73%, 20)
Current Price = $44.30 * (1 - (1/1.0473)^20) / 0.0473 + $1,000 * (1/1.0473)^20
Current Price = $44.30 * 12.752522 + $1,000 * 0.396806
Current Price = $961.74

Current Yield = Annual Coupon / Current Price
Current Yield = $88.60 / $961.74
Current Yield = 0.0921 or 9.21%