Question

Problem 5-01

Bond Valuation with Annual Payments

Jackson Corporation's bonds have 5 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 11%. The bonds have a yield to maturity of 7%. What is the current market price of these bonds? Round your answer to the nearest cent.

Problem 5-02

Yield to Maturity for Annual Payments

Wilson Wonders' bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity? Round your answer to two decimal places.

Problem 5-07

Bond Valuation with Semiannual Payments

Renfro Rentals has issued bonds that have a 8% coupon rate, payable semiannually. The bonds mature in 19 years, have a face value of $1,000, and a yield to maturity of 8%. What is the price of the bonds? Round your answer to the nearest cent.

Problem 5-08

Yield to Maturity and Call with Semiannual Payments

Thatcher Corporation's bonds will mature in 15 years. The bonds have a face value of $1,000 and an 7.5% coupon rate, paid semiannually. The price of the bonds is $900. The bonds are callable in 5 years at a call price of $1,050. Do not round off intermediate. Round your answers to two decimal places.

What is their yield to maturity?

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What is their yield to call?

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Problem 5-12
Bond Yields and Rates of Return

A 15-year, 14% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,075. The bond sells for $1,050. (Assume that the bond has just been issued.)

1. What is the bond's yield to maturity? Do not round your intermediate calculations. Round your answer to two decimal places.
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2. What is the bond's current yield? Do not round your intermediate calculations. Round your answer to two decimal places.
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3. What is the bond's capital gain or loss yield? Loss should be indicated with minus sign. Do not round your intermediate calculations. Round your answer to two decimal places.
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4. What is the bond's yield to call? Do not round your intermediate calculations. Round your answer to two decimal places.
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Problem 5-14
Current Yield with Semiannual Payments

A bond that matures in 7 years sells for $1,020. The bond has a face value of $1,000 and a yield to maturity of 10.5883%. The bond pays coupons semiannually. What is the bond's current yield? Do not round intermediate calculations. Round your answer to two decimal places.

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Answer 1

Current Market Price of the Bond

The Price of the Bond is the Present Value of the Coupon Payments plus the Present Value of the Face Value/Par Value.

The Price of the Bond is normally calculated either by using EXCEL Functions or by using Financial Calculator.

Here, the calculation of the Bond Price using financial calculator is as follows

Variables	Financial Calculator Keys	Figures
Par Value/Face Value of the Bond [$1,000]	FV	1,000
Coupon Amount [$1,000 x 11.00%]	PMT	110
Market Interest Rate or Yield to maturity on the Bond [7.00%]	1/Y	7
Maturity Period/Time to Maturity [5 Years]	N	5
Bond Price	PV	?

Here, we need to set the above key variables into the financial calculator to find out the Price of the Bond. After entering the above keys in the financial calculator, we get the Price of the Bond (PV) = $1,164.01.

“Hence, the current market price of these bonds will be $1,164.01”