McCue Inc.'s bonds currently sell for $1,175. They pay a $90 annual coupon, have a 25-year...

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McCue Inc.s bonds currently sell for $1,175. They pay a $90 annual coupon, have a 25-year maturity, and a $1,000 par value,

Ryngaert Inc. recently issued noncallable bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon

business finance

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Answer 1

Answer #1

1.
YTM is calculated by using the following excel formula:
=RATE(nper,pmt,pv,fv)
=RATE(25,-90,1175,-1000)
= 7.44%

YTC is calculated by using the following excel formula:
=RATE(nper,pmt,pv,fv)
=RATE(5,-90,1175,-1050)
= 5.76%

Difference between YTM and YTC = 7.44% - 5.76% = 1.68%

2.
Bond's selling price can be calculated by using the following excel formula:
=PV(rate,nper,pmt,fv)
=PV(7%,15,-57,-1000)
= $881.60

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Answer 2

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