Question

Name	Callable	Sub-Product Type	Coupon	Maturity	Ratings		Last Sale
					Moody's®	S&P	Price	Yield
V	Yes	Corporate Bond	3.150	12/14/2025	Aa3	AA-	106.061	2.040
V	Yes	Corporate Bond	4.150	12/14/2035	Aa3	AA-	119.011	2.652

1. Assume that par value of the bond is $1,000. What were the last prices of the bonds in $$$ (listed in the Price column)? Show your work.
2. Assume that par value of the bond is $1,000. Calculate the annual coupon interest payments. Show your work.
3. Assume that par value of the bond is $1,000. Calculate the current yield of the bonds. Show your work.
4. Write an analysis of the bonds. In your analysis you should answer the following questions. Please explain your answer to each question.
   1. How much is the YTM listed in quotations is for the bonds? Explain the meaning of YTM?
   2. If you are going to buy a bond issued by V, which bond would you choose? Why?
   3. Are these bonds callable? If the bonds that you chose are callable (non-callable), will it change your decision to buy them?

Answer 1

Current Yield = coupon / market price.

Name

Callable

Sub-Product Type

Coupon

Maturity

Ratings

Last Sale

Moody's®

S&P

Price

Yield

Last Price

Annual Coupon Price

Current Yield

V

Yes

Corporate Bond

3.15

12/14/2025

Aa3

AA-

106.061

2.04

1060.61

106.061%*1000

31.5

1000*3.15%

2.97%

31.5/1060.61

V

Yes

Corporate Bond

4.15

12/14/2035

Aa3

AA-

119.011

2.652

1190.11

119.011%*1000

41.5

1000*4.15%

3.49%

41.5/1190.11

Answer 4) Analysis

YTM is the markdown rate at which the whole of all future incomes from the security (coupons and head) is equivalent to the present cost of the security. The YTM is frequently given as far as Annual Percentage Rate (A.P.R.), however more regularly advertise show is pursued.

The two bonds have YTM as

Name	Callable	Sub-Product Type	Coupon
				Yield
					V	Yes	Corporate Bond	3.15	2.04
V	Yes	Corporate Bond	4.15	2.652

I prefer to choose bond with higher YTM value and long maturity with call option option.

Name

Callable

Sub-Product Type

Coupon

Maturity

Ratings

Last Sale

Moody's®

S&P

Price

Yield

V

Yes

Corporate Bond

4.15

12/14/2035

Aa3

AA-

119.011

2.652

Yes, the bonds are callable. The option of call has direct impact on my investment decision as it provide option of liquidity for bond holders.