It is June 29, 2019 and you have just begun work with XYZ Financial Services. A...
It is June 29, 2019 and you have just begun work with XYZ Financial Services. A client has seen the following price information about corporate bonds in the Wall Street Journal and has asked:
|
Company (Ticker) |
Coupon |
Maturity |
Last |
Chg |
Yield% |
|
AMR |
0.00 |
12/29/2045 |
27.016 |
+1.214 |
?????? |
Note that the bond has a par value of $1,000 and its yield is compounded semiannually.
(a) (5 points) Supply the missing information for AMR bond.
(b) (4 points) What are the current yield and expected capital gains yield for next year of AMR bond?
(c) (2 points) What is the yesterday’s price of AMR bond?
(d) (6 points) What is the implicit interest in dollars for year 2025 of AMR bond?
Please show your work do not use excel
Homework Answers
1. The yield of the bond is around ~14.5%.
Formula: (Face value/Current value)^(1/tenure)-1
tenure=26.5 years
3. 27.016-1.214=25.802
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