Write out the formulas, with the numbers filled in, to solve the following problems. For (a)...

Write out the formulas, with the numbers filled in, to solve the following problems. For (a) and (b), the market interest rate is 6.20%. You do not have to do the actual calculations for (a) through (c), but (d) requires a calculation. (a) Find the price of a 10-year bond (par = $1,000) with an annual coupon of 5.80%. Is this bond at a premium or discount? Explain briefly. (6 points). (b) Find the price of a 10-year bond (par = $1,000) with a coupon of 6.80%, paid monthly. (4 points). (c) Find the yield to maturity of a 10-year bond (par = $1,000) with an annual coupon of 6.80% and a price of $956.32. (4 points). (d) Calculate the effective annual return of the bond in (b).

Solutions

Expert Solution

Ans

a. Discount - price $970.8664

b.premium - $ 1044.6221

c. Ytm 7.4%

d. 6.5096%

note pvaf and pvif is calculated using financial calculator .

Pvaf -Put values n ,I/y and -1 in Pmt and cpt PV

Pvif - put values n,I/y and -1 in fv and cpt PV .

jeff jeffy answered 1 year ago

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