Question

In: Finance

Determine the current yield AND the approximate yield tomaturity for a 6.2%, $800,000 coupon bond...

Determine the current yield AND the approximate yield to maturity for a 6.2%, $800,000 coupon bond selling for $822,400 and maturing in 20 years.

Expert Solution

a.Information provided:

Future value= $800,000

Present value= $822,400

Time= 20 years

Coupon rate= 6.2%

Coupon payment= 0.062*$800,00= $49,600

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

FV= 800,000

PV= -822,400

N= 20

PMT= 49,600

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

The value obtained is 5.9567.

Therefore, the yield to maturity is 5.96%.

b.Current yield is calculated using the below formula:

Current Yield= Annual interest/ Current price

= $49,600 / $822,400

= 0.0603*100

= 6.03%.

jeff jeffy answered 2 years ago

If the current yield of a bond goes down from 6.2% to 4.1%, by what percent...

If the current yield of a bond goes down from 6.2% to 4.1%, by what percent does the market price increase? Round your answer to the nearest percent. Suppose that 5 years ago, you purchased 294 shares of stock in a corporation. Between then and now, the stock had a 2:1 split and a 4:1 split. Today, each share sells for $15. If selling all of your shares today would give your investment an annual rate of return of 12%,...

Current yield and yield to maturity An annual coupon bond has a $1,000 face value, coupon...

Current yield and yield to maturity An annual coupon bond has a $1,000 face value, coupon rate of 5%, will mature in 10 years, and currently sells for $810.34. a. What is the yield to maturity of the bond? b. What is the current yield of the bond? c. Why does the current yield differ from the yield to maturity? d. One year later, the market rates have increased to 8%. Assume that you have just received a coupon payment...

13. If a 7% coupon bond is trading for $975.00, it has a current yield of...

13. If a 7% coupon bond is trading for $975.00, it has a current yield of ____________ percent. A) 7.00 B) 6.53 C) 7.24 D) 7.18 14. If a 6% coupon bond is trading for $950.00, it has a current yield of ____________ percent. A) 6.5 B) 6.3 C) 6.1 D) 6.0 E) 6.6 15. If an 8% coupon bond is trading for $1025.00, it has a current yield of ____________ percent. A) 7.8 B) 8.7 C) 7.6 D) 7.9...

Consider a 5-year bond with a current yield of 8% and a coupon rate of 10%...

Consider a 5-year bond with a current yield of 8% and a coupon rate of 10% (compounded yearly). One year from now this bond will have a quoted price which is most likely: Higher Lower The same Possibly higher or lower

A.) What’s the current yield of a 4.30 percent coupon corporate bond quoted at a price...

A.) What’s the current yield of a 4.30 percent coupon corporate bond quoted at a price of 101.88? (Round your answer to 2 decimal places.) Your discount brokerage firm charges $8.85 per stock trade. B.) How much money do you need to buy 190 shares of Pfizer, Inc. (PFE), which trades at $43.72? (Round your answer to 2 decimal places.) C.) Determine the interest payment for the following three bonds. (Assume a $1,000 par value.) (Round your answers to 2...

Explain why yield to maturity is higher than current yield when you buy a coupon-bearing bond...

Explain why yield to maturity is higher than current yield when you buy a coupon-bearing bond for less than its $1000 face value? If interest rates suddenly fall, would you rather be holding a portfolio composing of short-term securities or long-term securities? A zero-coupon bond with face value of $10,000 that matures in two years goes on sale today for $9,100. What is the bond’s yield to maturity? Using the bond described in the previous question, imagine that you purchase...

What information do you need to determine the yield of a coupon bond? 28) ______ I)...

What information do you need to determine the yield of a coupon bond? 28) ______ I) Bond price II) Coupon rate III) Par value IV) Maturity date V) Yield curve.

Consider a $1,000.00 face value bond with a $ 33 annual coupon. Calculate the current yield...

Consider a $1,000.00 face value bond with a $ 33 annual coupon. Calculate the current yield if the bond is purchased for $ 1,080 Suppose a Treasury bill has * purchase price of $ 9,559 a face value of $10,000 210 days to maturity. Calculate the yield to maturity

What is the yield to maturity of the following bond? Current year: 2019 Coupon 9% Maturity...

What is the yield to maturity of the following bond? Current year: 2019 Coupon 9% Maturity date 2027 Interest paid semiannually Par Value $1000 Market price $955.00 What is the current yield of bond ?

You buy a four-year bond that has a 3.50% current yield and a 3.50% coupon (paid...

You buy a four-year bond that has a 3.50% current yield and a 3.50% coupon (paid annually). In one year, promised yields to maturity have risen to 4.50%. What is your holding-period return? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Holding-period return %