Two bonds are given. A 9.3%, 23-year semiannual bond at 112.429 A 11.4%, 26-year semiannual bond...
Two bonds are given.
- A 9.3%, 23-year semiannual bond at 112.429
- A 11.4%, 26-year semiannual bond at 100.834
Assume that the par value of the bond is $1,000.
- Which of these two bonds offers the highest current
yield?
-Select- Item 1 or 2 - Which one has the highest yield to maturity?
-Select Item 1 or 2
Homework Answers
1.
Bond 2 offers the highest current yield
Current Yield=Coupon rate*Face Value/Price
Bond 1=9.3%*100/112.429
=8.2719%
Bond 2=11.4%*100/100.834
=11.3057%
2.
Bond 2 offers the highest yield to maturity
Bond 1=RATE(23*2,9.3%*100/2,-112.429,100)*2=8.1000%
Bond 2=RATE(26*2,11.4%*100/2,-100.834,100)*2=11.3000%
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