Question

7. Mides cooperation bonds mature in 3 years and have a yield to ma of the bond is 1000. The bond have a 10% coupon the What is the capital gain yield closs) on this bond? a, 9.625% b. 1.125% b. 8.5% d. 1.125% a yield to maturity of 8.5%. The par value coupon rate and pay interest on semiannual basis. 8. A ten year bond is currently selling for S1037 and has vield to maturity of 6.23%, what is coupon rate for this bond if the face value is $1000? a. 6.75% b. 7.5% e, 8.5% d. 9.5% 9. A semiannual corporate bond has a face value of $1.000, a yield to maturity of 7.2 percent, and a coupon rate of 7.5 percent. The bond matures 10 years from today. This bond: a, pays interest payments of $75.00 every six months, b. sells at par value. e, is currently quoted at a price of 101.02. d. has a current yield of 7.34 percent 10. Determine how much you would be willing to pay for a bond that pays $60 annual in indefinitely and never matures (i.e, a perpetuity), assuming you require an 8 percent rate return on this investment. a S480 b. $743 c. $1,000 d. $750

Answer 1

n=3 years for semi annual =6 payments ,YTM=0.085 for semi annual it is 0.085/2=0.0425, coupon rate i=10% for semi annual it is 0.05,

Price of the bond=1000,

Formula in excel PV(0.0425,6,50,1000)=1039.

If manual then

1	0.9592326
2	0.9201272
3	0.882616
4	0.8466341
5	0.812119
6(PVF @ 6th time)	0.7790111
PVAF(Sum of the above gives)	5.19974

Inserting in formula =50*(5.19974)+(1000*0.7790111)=1038.998 (PV=C*PVAF(r/2,2n)+P0*PVF(r/2,2nth)

Capital gain=((1038.998-1000)/(1000))*100=3.8998.

For half yearly =3.8998/2=1.95%

In the question two options have same answer.