Question

Question 9

One year ago, XYZ Co. issued 16-year bonds at par. The bonds have a coupon rate of 6.49 percent, paid semiannually, and a face value of $1,000. Today, the market yield on these bonds is 6.85 percent. What is the percentage change in the bond price over the past year? Answer to two decimals

Question 10

Suppose ABC Co. issues $18.37 million of 17 year zero coupon bonds today. If investors require a return of 6.18 percent compounded semiannually and all the bonds remain outstanding until they mature, how much (in $ millions) will ABC have to pay to redeem the bonds. Answer in millions to two decimals - ie, if you get $50,268,382, you should enter 50.27.

Answer 1

9)	Par/Face value	1000
	Annual Coupon rate	0.0649
	Annual coupon	64.9
	semi-annual coupon	32.45
	Present Value = Future value/[(1+(r/m))^mt]
	r is the interest rate that is 6.85%.
	m is the compounding period that is 2
	mt is the time period.
	price of the bond = sum of present values of future cash flows
	r/2	0.03425
	mt	1	2	3	4	5	29	30
	future cash flow	32.45	32.45	32.45	32.45	32.45	32.45	1032.45
	present value	31.3753928	30.33637	29.33176	28.36042	27.42124	12.22009	375.9267
	sum of present values	966.58
	The price of this bond is $966.58.
	% change in bond price over the past year	(966.58 - 1000)/(1000)
	% change in bond price over the past year	-3.34%
10)	Par/Face value	1000
	Annual Coupon rate	0
	Annual coupon	0
	semi-annual coupon	0
	Present Value = Future value/[(1+(r/m))^mt]
	r is the interest rate that is 6.18%.
	m is the compounding period that is 2
	mt is the time period.
	price of the bond = sum of present values of future cash flows
	r/2	0.0309
	mt	1	2	3	4	5	29	30	31	32	33	34
	future cash flow	0	0	0	0	0	0	0	0	0	0	1000
	present value	0	0	0	0	0	0	0	0	0	0	355.3347
	sum of present values	355.33
	The price of this bond is $355.33.
	Amount of bonds (in dollars)	18370000
	Par/Face value	1000
	Number of bonds	18370
	Price of each bond	355.33
	Amount ABC will have to pay to redeem the bonds	Number of bonds*Price of each bond
	Amount ABC will have to pay to redeem the bonds	6527498.93
	Amount ABC will have to pay to redeem the bonds (in millions)	6.52749893
	ABC will have to pay $6.53 million to redeem the bonds.