Question

In: Finance

A corporate bond with a face value of $400,000 selling at a quote of 94.00 today...

A corporate bond with a face value of $400,000 selling at a quote of 94.00 today has a coupon of 5% and matures in 12 years. What is the YTM of this bond? What is its credit spread compared to the Treasury yield of 3.5%? YTM=? Credit Spread=?

Solutions

Expert Solution

fv of bond is : $400,000

pv of bond is : 94% * 4,00,000 = $3,76,000

coupon payments (PMT) = $20,000

N = 12 YEARS

THEREFORE, THE YTM IS = 5.7%

THE TREASURY YIELD IS 3.5%

THE CREDIT SPREAD = DIFFERENCE IN THE YIELD OF CORPORATE BONDS - YIELD ON THE TREASURY

= 2.2%

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

   4)Consider two $27,000 face value corporate bonds. Bond A is currently selling for $26,946 and...
   4)Consider two $27,000 face value corporate bonds. Bond A is currently selling for $26,946 and matures in 18 years. Bond B sells for $25,245 and matures in 3 years. Calculate the current yield for both bonds if both have a coupon rate equal to 4%. (Assume a yearly coupon payment). 1)Current yield Bond A to 2 decimal places 2)Current yield Bond B to 2 decimal places 3)YTM Bond A to 2 decimal places 4)YTM Bond B to 2 decimal...
What is the quote of a 5 year, zero coupon bond with $1000 face value if...
What is the quote of a 5 year, zero coupon bond with $1000 face value if the yield to maturity is 2.6% (semiannual compounding)? Round to 3 decimal places
Bond Valuation A corporate bond has a face value of $1,000. The bond has an 8%...
Bond Valuation A corporate bond has a face value of $1,000. The bond has an 8% coupon rate and it has 13 years to maturity. The interest rate on similar bonds is 6%. Assume interest is paid annually. What is the current price of this bond? Assume everything in #1 above, except the interest rate on similar bonds is 4%. What is the current price of this bond? Assume everything in #1 above, except the interest rate on similar bonds...
Find the price of a bond. The time is today. The $1,000 par value corporate bond...
Find the price of a bond. The time is today. The $1,000 par value corporate bond you are interested in has a 5% coupon rate, paid semi-annually. The maturity of the bond is 20 years. The rating agencies have determined that this company should have a B+ rating, making its yield be 6%. Show a time line of these cash flows.   What is the price you will have to pay for the bond? N                I                 PV              PMT           FV
A seventeen-year, semiannual coupon bond is selling for $1,030. The bond has a face value of...
A seventeen-year, semiannual coupon bond is selling for $1,030. The bond has a face value of $1,000 and a yield to maturity of 5.95 percent. What is the coupon rate? Multiple Choice 2.65 percent 5.95 percent 6.40 percent 6.23 percent 3.12 percent
4. (Bond yield) A firm issues a bond today with a $1000 face value, an 8%...
4. (Bond yield) A firm issues a bond today with a $1000 face value, an 8% coupon rate, and 25-year maturity. a. An investor purchases the bond for $900, what is the YTM? b. Suppose the investor buys the bond for $1,200 instead, what is the YTM? c. Suppose the investor buys the bond for $1,000, what is the YTM? d. Suppose the bond in fact pays coupons semi-annually and has a price of $820, what is the YTM? 5....
Suppose there is a corporate bond. Its face value is $2000. And the maturity is 4...
Suppose there is a corporate bond. Its face value is $2000. And the maturity is 4 years. Its coupon is $10 issued at the end of each year. Its price is $1900 right now. The interest rates for bonds and stocks are 2% and 3%, respectively. The market price of stock of this company is $25 right now. And the shares outstanding is 25,000 shares. And the tax rate is 20%. The ratio of debt to equity is 0.2. (30...
Suppose there is a corporate bond. Its face value is $2000. And the maturity is 4...
Suppose there is a corporate bond. Its face value is $2000. And the maturity is 4 years. Its coupon is $10 issued at the end of each year. Its price is $1900 right now. The interest rates for bonds and stocks are 2% and 3%, respectively. The market price of stock of this company is $25 right now. And the shares outstanding is 25,000 shares. And the tax rate is 20%. The ratio of debt to equity is 0.2. Suppose...
Suppose there is a corporate bond. Its face value is $2000. And the maturity is 4...
Suppose there is a corporate bond. Its face value is $2000. And the maturity is 4 years. Its coupon is $10 issued at the end of each year. Its price is $1900 right now. The interest rates for bonds and stocks are 2% and 3%, respectively. The market price of stock of this company is $25 right now. And the shares outstanding is 25,000 shares. And the tax rate is 20%. The ratio of debt to equity is 0.2. (30...
Suppose there is a corporate bond. Its face value is $2000. And the maturity is 4...
Suppose there is a corporate bond. Its face value is $2000. And the maturity is 4 years. Its coupon is $10 issued at the end of each year. Its price is $1900 right now. The interest rates for bonds and stocks are 2% and 3%, respectively. The market price of stock of this company is $25 right now. And the shares outstanding is 25,000 shares. And the tax rate is 20%. The ratio of debt to equity is 0.2. a....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT