Question

Bond Valuation with Annual Payments

Jackson Corporation's bonds have 5 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 11%. The bonds have a yield to maturity of 10%. What is the current market price of these bonds? Round your answer to the nearest cent.

Yield to Maturity for Annual Payments

Wilson Wonders' bonds have 15 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 12%. The bonds sell at a price of $1,100. What is their yield to maturity? Round your answer to two decimal places.

Yield to Maturity for Annual Payments

Wilson Wonders' bonds have 15 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 12%. The bonds sell at a price of $1,100. What is their yield to maturity? Round your answer to two decimal places.

Bond Valuation with Semiannual Payments

Renfro Rentals has issued bonds that have a 11% coupon rate, payable semiannually. The bonds mature in 18 years, have a face value of $1,000, and a yield to maturity of 8.5%. What is the price of the bonds? Round your answer to the nearest cent.

Answer 1

1.Information provided:

Par value= future value= $1,000

Time= 5 years

Yield to maturity= 10%

Coupon rate= 11%

Coupon payment= 0.11*1,000= $110

The current market value of the bond is calculated by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 1,000

N= 5

I/Y= 10

PMT= 110

Press the CPT key and PV to compute the present value.

The value obtained is 1,037.91.

Therefore, the current market value of the bond is $1,037.91    $1,038.

2. Information provided:

Par value= future value= $1,000

Time= 15 years

Coupon rate= 12%

Coupon payment= 0.12*1,000= $120

Current value= present value= $1,100

The yield to maturity is calculated by entering the below in a financial calculator:

FV= 1,000

N= 15

PMT= 120

PV= -1,100

Press the CPT key and I/Y to compute the yield to maturity.

The value obtained is 10.64.

Therefore, the yield to maturity is 10.64%.

3. Information provided:

Par value= future value= $1,000

Time= 18 years*2= 36 semi-annual periods

Yield to maturity= 8.5%/2= 4.25% per semi-annual period

Coupon rate= 11%/2= 5.50%

Coupon payment= 0.055*1,000= $55

The price of the bond is calculated by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 1,000

N= 18

I/Y= 4.25

PMT= 55

Press the CPT key and PV to compute the present value.

The value obtained is 1,155.07.

Therefore, the current market value of the bond is $1,155.07   $1,155.

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