Question

Question 15 1 pts Assume that you wish to buy a bond with 27 years to maturity, with a par value of $1,000, and a coupon rate of 22.33%. Assume semi-annual payments. If the yield to maturity (YTM) is 21.43%, what is today's price of this bond? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. Question 16 1 pts Price a 2-yr 4% semiannual coupon bond with a par value of $1000 and the yield to maturity (discount rate) is 4.90% per annum. Round the answer to the nearest 2 decimal points. If your answer is $12.345, enter "12.35" in the answer box. Question 17 1 pts ABC Inc. recently issued $1,000 par bonds at a 3.55% coupon rate. If the bonds have 12 years to maturity and current price of $850, what is the yield to maturity? Assume semi-annual compounding. Note: Convert your answer to percentage and round off to two decimal points. Do not enter % in the answer box.

Answer 1

Question 15

Information provided:

Par value= future value= $1,000

Time= 27 years*2= 54 semi-annual periods

Coupon rate= 22.33%/2= 11.165%

Coupon payment= 0.11165*1,000= 111.65 per semi-annual period

Yield to maturity= 21.43%/2= 10.72% per semi-annual period

The price of the bond is calculated by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 1,000

N= 54

PMT= 111.65

I/Y= 10.72

Press the CPT key and PV to compute the present.

The value obtained is 1,041.34.

Therefore, the price of the bond today is $1,041.34.

Question 16

Information provided:

Par value= future value= $1,000

Time= 2 years*2= 4 semi-annual periods

Coupon rate= 4%/2= 2%

Coupon payment= 0.02*1,000= $20 per semi-annual period

Yield to maturity= 4.90%/2= 2.45% per semi-annual period

The price of the bond is calculated by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 1,000

N= 4

PMT= 20

I/Y=2.45

Press the CPT key and PV to compute the present.

The value obtained is 983.05.

Therefore, the price of the bond today is $983.05.

Question 17

Information provided:

Par value= future value= $1,000

Current price= present value= $850

Time= 12 years*2= 24 semi-annual periods

Coupon rate= 3.55%/2= 1.7750%

Coupon payment= 0.017750*1,000= $17.75

The yield to maturity is calculated by entering the below in a financial calculator:

FV= 1,000

PV= -850

N= 24

PMT= 17.75

Press the CPT key and I/Y to compute the yield to maturity.

The value obtained is 2.6254.

Therefore, the yield to maturity is 2.6254%*2= 5.2507% $\rightarrow$ 5.25%.

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