Question

A 7% semiannual coupon bond matures in 4 years. The bond has a face value of $1,000 and a current yield of 7.3432%.

What is the bond's price? Do not round intermediate calculations. Round your answer to the nearest cent.
$ __773.53 (NOT CORRECT)

What is the bond's YTM? (Hint: Refer to Footnote 7 for the definition of the current yield and to Table 7.1.) Do not round intermediate calculations. Round your answers to two decimal places.
__7.14 % (NOT CORRECT)

Calculation of Current Yields, Capital Gains Yields, and Total Returns for 7%, 10%, and 13% Coupon Bonds When the Market Rate Remains Constant at 10%

Please do not answer if you are unsure, thank you!

Answer 1

1) 7% Semiannual bond

Face value = $1,000, Semiannual coupon = 7%/2 = 3.5*1000 = $35

Current yield = 7.3432%, Semiannual yield = 7.3432%/2 = 3.6716%

Current semiannual yield = Semiannual coupon / Bond price

Bond price = 35 / 3.6716% = $953.2629

2) Number coupon period = 4*2 =8

Using excel formula, Yield to maturity = 2* RATE(8,35,-953.2629,1000)

Yield to maturity = 8.40%

3)

Coupon rate	7%	10%	13%
Face value of bond	1000	1000	1000
Actual Coupon	70	100	130
Years to maturity	8	8	8
Market yield	10%	10%	10%
Bond price	$840	$1,000	$1,160
Current yield	8.33%	10.00%	11.21%
Capital gain yield	-19.1%	0.0%	13.8%
Total returns (coupon + capital gain yield)	-12.05%	10.00%	26.80%

Excel formula: