1) Assume there's a security that pays a cash flow of $250 at THE BEGINNING of...

Assume there's a security that pays a cash flow of $250 at THE BEGINNING of each quarter for the next nine years. Interest rates are currently 6% and expected to stay there for the foreseeable future. What's the most you would pay for this security? (Be careful. Think clearly about when your payments are received, in particular your last payment).

Assume it's Jan 1st, 2019. You are thinking of buying a Chick-fil-A bond that matures Dec 31st, 2031. The coupon rate for this bond is 8% (paid semi-annually). If the yield-to-maturity on the bond is 8.75%, what is the current price of this bond? (Be careful with counting periods)

Assume it's Jan 1st, 2019. You are thinking of buying a Chick-fil-A bond that matures Dec 31st, 2031. The coupon rate for this bond is 8% (paid semi-annually). If the current market price is $1,011, what is the yield to maturity of this bond (round to two decimal points; answer in percent form)?

Assume it's Jan 1st, 2019. You are thinking of buying a Chick-fil-A bond that matures Dec 31st, 2031. The coupon rate for this bond is 8% (paid semi-annually). If the current market price is $897, what is the "current yield" of this bond (round to two decimal points; answer in percent form)?

Solutions

Expert Solution

a	Price for the security	($7,018.90)

b	Price of the bond	($942.44)

c	Semiannaul Rate	3.93%
	Annual YTM	7.86%

d	Current yield=Annual dividend/ Price	8.92%

WORKINGS using excel formulae as follows

jeff jeffy answered 1 year ago

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