Question

In: Finance

On the next seven questions, express monetary answers to the nearest whole dollar and percentages to...

On the next seven questions, express monetary answers to the nearest whole dollar and percentages to the
nearest hundredth.

15. The price of a zero-coupon bond with an eight year maturity is $3,852.75. The face value of the bond is
$5,000. What is the yield on the bond? (Assume semi-annual compounding) (Express the percentage to the
nearest hundredth)


16. Calculate the price of a 7.48% coupon bond with 12 years left to maturity and a market interest rate of 8.74%.
Assume interest rates are semiannual and par value is $1,000. (Express the monetary value to the nearest
whole dollar.)


17. A 6.75 percent coupon bond with 12 years left to maturity can be called in 4 years. The call premium is one
year of coupon payments. It is offered for sale at $1,062.75. Assume that interest payments are paid semiannually
and par value is $1,000. What is the yield to call of the bond? (Express the percentage to the
nearest hundredth)

Solutions

Expert Solution

15

                  K = Nx2
Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =8x2
3852.75 =∑ [(0*5000/200)/(1 + YTM/200)^k]     +   5000/(1 + YTM/200)^8x2
                   k=1
YTM% = 3.28

16

                  K = Nx2
Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =12x2
Bond Price =∑ [(7.48*1000/200)/(1 + 8.74/200)^k]     +   1000/(1 + 8.74/200)^12x2
                   k=1
Bond Price = 907.48

Please ask remaining parts seperately, questions are unrelated, I have done one bonus

jeff jeffy answered 10 months ago
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