Question

1. What is the yield to maturity for a $1,000 par, 10 year, 8% coupon bond with semiannual payments, callable in 3 years for $1,050 that sells for $1,071.06?

A. 13.2%

B. 5.4%

C. 7.0%

D. 9.0%

2. What is the yield to call for a $1,000 par, 10 year, 8% coupon bond with semiannual payments, callable in 3 years for $1,050 that sells for $1,071.06?

A. 14.2%

B. 6.9%

C. 9.0%

D. 5.4%

3. What is the yield to maturity for a $1,000 par, 20 year, 8% coupon bond with semiannual payments, callable in 3 years for $1,050 that sells for $907.99?

A. 5.4%

B. 9.0%

C. 7.0%

D. 13.2%

4. What is the yield to call for a $1,000 par, 20 year, 8% coupon bond with semiannual payments, callable in 3 years for $1,050 that sells for $907.99?

A. 9.0%

B. 13.2%

C. 7.0%

D. 5.4%

Thank you in advance!!!

Answer 1

1). To find the YTM, we need to put the following values in the financial calculator:

INPUT	10x2=20		-1,071.06	(8%/2)x1,000=40	1,000
TVM	N	I/Y	PV	PMT	FV
OUTPUT		3.50

As r = 3.50%,

YTM = 2r = 2 x 3.50% = 7.00%

Hence, Option "C" is correct.

2). To find the YTC, we need to put the following values in the financial calculator:

INPUT	3x2=6		-1,071.06	(8%/2)x1,000=40	1,050
TVM	N	I/Y	PV	PMT	FV
OUTPUT		3.43

As r = 3.43%,

YTM = 2r = 2 x 3.43% = 6.87%, or 6.9%

Hence, Option "B" is correct.

3). To find the YTM, we need to put the following values in the financial calculator:

INPUT	20x2=40		-907.99	(8%/2)x1,000=40	1,000
TVM	N	I/Y	PV	PMT	FV
OUTPUT		4.50

As r = 4.50%,

YTM = 2r = 2 x 4.50% = 9.00%

Hence, Option "B" is correct.

1). To find the YTM, we need to put the following values in the financial calculator:

INPUT	3x2=6		-907.99	(8%/2)x1,000=40	1,050
TVM	N	I/Y	PV	PMT	FV
OUTPUT		6.61

As r = 6.61%,

YTM = 2r = 2 x 6.61% = 13.2%

Hence, Option "B" is correct.