Question

In: Finance

Consider a 19-year bond with 13 percent annual coupon payments. The market rate (YTM) is 6.6...

Consider a 19-year bond with 13 percent annual coupon payments. The market rate (YTM) is 6.6 percent for this bond. The current yield of the bond is _______ percent. Answer it in percentage without the % sign, and round it to two decimal place, e.g., 5.69.

Expert Solution

Information provided:

Par value= future value= $1,000

Time= 19 years

Yield to maturity=6.60%

Coupon rate= 13

Coupon payment= 0.13*1,000= $130

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= 19

PMT= 130

I/Y= 6.60

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

The value obtained is 1,681.7920.

Therefore, the price of the bond is $1,681.79.

Current yield is calculated by using the below formula:

Current Yield= Annual interest/Current price

= $130/$1,681.79

= 0.0773*100

= 7.73.

Therefore, the current yield of the bond is 7.73 percent.

In case of any query, kindly comment on the solution

jeff jeffy answered 2 hours ago

Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 7.5 percent, a YTM of 6 percent, and 13 years to maturity.

Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 7.5 percent, a YTM of 6 percent, and 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 6 percent, a YTM of 7.5 percent, and also 13 years to maturity. Assume the interest rates remain unchanged and a $1,000 par value. a. What are the prices of these bonds today? (Do not round intermediate...

Galvatron Metals has a bond outstanding with a coupon rate of 6.6 percent and semiannual payments....

Galvatron Metals has a bond outstanding with a coupon rate of 6.6 percent and semiannual payments. The bond currently sells for $1,856 and matures in 22 years. The par value is $2,000 and the company's tax rate is 39 percent. What is the company's aftertax cost of debt?

First, consider a 10 year bond with a coupon rate of 7% and annual coupon payments....

First, consider a 10 year bond with a coupon rate of 7% and annual coupon payments. Draw a graph showing the relationship between the price and the interest on this bond. The price should be on the y- axis and the interest rate on the x-axis. To compute the various prices, consider interest rates between 2% and 12% (use 0.5% increments). So your x-axis should go from 2%, then 2.5% ... until 11.5% and then 12%. Is the relationship linear...

Bond Dave has a 8 percent coupon rate, makes semiannual payments, a 8 percent YTM, and...

Bond Dave has a 8 percent coupon rate, makes semiannual payments, a 8 percent YTM, and 27 years to maturity. If interest rates suddenly rise by 4 percent, what is the percentage change in the price of Bond Dave? Enter the answer with 4 decimals (e.g. 0.0123).

Bond Dave has a 7 percent coupon rate, makes semiannual payments, a 7 percent YTM, and...

Bond Dave has a 7 percent coupon rate, makes semiannual payments, a 7 percent YTM, and 26 years to maturity. If interest rates suddenly rise by 5 percent, what is the percentage change in the price of Bond Dave? 4 decimals (e.g. 0.0123).

What is the coupon rate for the bond? Assume semi-annual payments. Answer as a percent! Bond...

What is the coupon rate for the bond? Assume semi-annual payments. Answer as a percent! Bond Coupon Rate Yield Price t Apple B ? 5.1% 1012.5 14 7. A bond that yields 6% pays a coupon of $20 semi-annually. Which of the following is most likely the price of the bond? $990 $1000 $1050 Not enough information to determine.

You own a bond with a coupon rate of 6.6 percent and a yield to call...

You own a bond with a coupon rate of 6.6 percent and a yield to call of 7.5 percent. The bond currently sells for $1,092. If the bond is callable in five years, what is the call premium of the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

GE has a 7-year, 4.5% coupon bond with semi-annual coupon payments. The current YTM is 3.5%....

GE has a 7-year, 4.5% coupon bond with semi-annual coupon payments. The current YTM is 3.5%. What is duration of this bond and how much will price change if YTM goes up by 1% using duration approximation method?

Consider a 5- year bond with a semi-annual 10% coupon and a yield to maturity(ytm) of...

Consider a 5- year bond with a semi-annual 10% coupon and a yield to maturity(ytm) of 9.00%. what is the duration of this bond in years?

You have the following bond : 5-year 6% coupon with annual interest payments YTM IS 6%...

You have the following bond : 5-year 6% coupon with annual interest payments YTM IS 6% A. Calculate price and duration of this bond B. Calculate new price if YTM instantly inceases to 8% C. Calculate new duration based on part B. D. What can you conclude about relationship between market interest rates and Duration