Question

A.Zero Coupon Bonds A 7 year maturity zero coupon corporate bond has an 8% promised yield. The bond's price should equal B.The Fishing Pier has 6.40 percent, semi-annual bonds outstanding that mature in 12 years. The bonds have a face value of $1,000 and a market value of $1,027. What is the yield to maturity?

C.Bond Yields Find the promised yield to maturity for a 7% coupon, $1,000 par 20 year bond selling at $1115.00. The bond makes semiannual coupon payments.

Answer 1

Answer 2

SOLUTION :

A.

Let us assume face value of bod = 100($)

So, price of bond = 100/(1 + 0.08)^7 = 58.35 ( % of face value)

Bond price is quoted as % of face value.  

B.

Use online calculator for YTM : ref. https://dqydj.com/bond-yield-to-maturity-calculator/ 

Enter :

Current price ($) = 1027 

Face value ($) = 1000

Years to maturity = 12 

Coupon rate (%) = 6.40 

Coupon payments frequency = 2

Press compute , we get YTM = 6.080 % (ANSWER).

C

Use online calculator for YTM : ref. https://dqydj.com/bond-yield-to-maturity-calculator/ 

Enter :

Current price ($) = 1115 

Face value ($) = 1000

Years to maturity = 20 

Coupon rate (%) = 7

Coupon payments frequency = 2

Press compute , we get YTM = 6.005 % (ANSWER).