Question

In: Finance

A 6% annual coupon bond has 11 years remaining until maturity. Par value is $1000. The...

A 6% annual coupon bond has 11 years remaining until maturity. Par value is $1000.
The required rate of return (yield to maturity)on the bond is 8.5%.
Compute the price of the bond today using the appropriate Excel formula
Compute the price of the same bond if it has 10 years remaining to maturity instead of 11.
What is the capital gains yield on the bond?
What is the current yield on the bond?
What is the total yield on the bond?
What will the bond's price be at the instant before it matures?
SHOW WORK HERE, HIGHLIGHT FINAL ANSWERS IN YELLOW
11 years 10 years
PV
RATE
NPER
PMT
FV

Solutions

Expert Solution

As per rules I am answering the first 4 subparts of the question

11 years 10 years
PV $825.78 $835.97
RATE 8.50% 8.50%
NPER 11 10
PMT 60 60
FV 1000 1000
Q No
1 Compute the price of the bond today using the appropriate Excel formula $825.78   
2 Compute the price of the same bond if it has 10 years remaining to maturity instead of 11. $835.97
3 What is the capital gains yield on the bond? 1.23%
4 What is the current yield on the bond? 7.27%

WORKINGS


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