Question

1. Lycan, Inc., has 8.7 percent coupon bonds on the market that have 10 years left to maturity. The bonds make annual payments and have a par value of $1,000. If the YTM on these bonds is 10.7 percent, what is the current bond price? (Show your work. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 2. The Timberlake-Jackson Wardrobe Co. has 11.8 percent coupon bonds on the market with eight years left to maturity. The bonds make annual payments and have a par value of $1,000. If the bonds currently sell for $1,124.97, what is the YTM? (Show your work. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 3. You purchase a bond with a coupon rate of 9.4 percent, a par value of $1,000, semiannual coupons, and a clean price of $820. If the next coupon payment is due in three months, what is the invoice price? (Show your work. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

	1	Current Bond Price=Present Value of future cash in flows
		Par Value of Bonds	$1,000
	Pmt	Annual Coupon amount =8.7%*1000	$87
	Rate	Yield to Maturity	10.70%
	Nper	Number of years to maturity	10
	Fv	Payment at maturity	$1,000
	PV	Current Bond Price	$880.72
		(Using PV function of excel
	2	YTM of the bond
		Par Value of Bonds	$1,000
	Pmt	Annual Coupon amount =11.8%*1000	$118
	Pv	Current Bond Price	$1,124.97
	Nper	Number of years to maturity	8
	Fv	Payment at maturity	$1,000
	RATE	YTM of the bond	9.50%
		(Using RATE function of excel)
	3	Invoice Price=Clean Price PLUS Interest
		Par Value	$1,000
		Interest rate	9.40%
		Semi annual Coupon =(1000*9.4%)/2	$47.00
		Three months interest =47*(3/6)=	$23.50
		Clean Price	$820
		Invoice Price =820+23.50=	$843.50