Question

Donas issued by Brawndo Inc. bear a 11.48% coupon, payable semiannually. I mature in 15 years and have a $1.000 face value. Currently the bonds sel yo coupon, payable semiannually. The bonds is the yield to maturity? lue. Currently the bonds sell for $537.47. What a) 20.50% b) 24.96% c) 22.20% d) 20.21% e) 18.10% 5) Merlins Publications has $1,000 face value bonds which currently sell for $1208. They have a 6.15% annual coupon rate. What is the current yield on these bonds? a) 4.58% b) 5.00% c) 5.17% d) 8.70% e) 5.09%

Answer 1

4)

Number of periods = 15 * 2 = 30

Coupon = (0.1148 * 1000) / 2 = 57.4

Yield to maturity = 22.20%

Keys to use in a financial calculator:

2nd I/Y 2

FV 1000

PV -537.47

PMT 57.4

N 30

CPT I/Y

5)

Coupon = 0.0615 * 1000 = 61.5

Current yield = (Annual coupon / price) * 100

Current yield = (61.5 / 1208) * 100

Current yield = 5.09%