Question

1- What is the price of the bond given the information below. The bond makes annual interest payments. (Do not round intermediate calculations, round answer to two decimals, i.e. 32.16)

Coupon Rate:7.9%

YTM:10.3%

Maturity (years):7

Par value: $1,000

Current Price: ?

2- What is the YTM of the bond given the information below. The bond makes annual interest payments. (Do not round intermediate calculations, round answer to two decimals, i.e. 32.16)

Coupon Rate:8.5%

Maturity (years):12

Current Price: $1,236.64

Par value: $1,000.00

YTM: ? .

3- What is the copon rate of the bond given the information below. The bond makes annual interest payments. (Do not round intermediate calculations, round answer to two decimals, i.e. 32.16)

YTM:9.5%

Maturity (years):24

Current Price: $967.96

Par value: $1,000.00

Cpoupon Rate: ?

4- What is the price of the bond given the information below. The bond makes semiannual interest payments. (Do not round intermediate calculations, round answer to two decimals, i.e. 32.16)

Coupon Rate:6.7%

YTM:10.2%

Maturity (years):30

Par value: $1,000

Current Price: ?

Answer 1

1. Use PV function in EXCEL to find the price of the bond

=PV(rate,nper,pmt,fv,type)

rate=YTM=10.3%

nper=7 years

pmt=coupon paymnet=(coupon arte*face value)=(7.9%*1000)=79

fv=face value=1000

=PV(10.3%,7,79,1000,0)=$884.30

Current price=$884.30

2. Use RATE function in EXCEL to find the YTM

=RATE(nper,pmt,pv,fv,type)

nper=12 years

pmt=(8.5%*1000)=85

pv=1236.64

fv=1000

=RATE(12,85,-1236.64,1000,0)=5.72%

YTM=5.72%

3. Use PMT function to find the coupon rate

=PMT(rate,nper,pv,fv,type)

rate=9.5%

nper=24 years

pv=967.96

fv=1000

=PMT(9.5%,24,-967.96,1000,0)=91.57

Coupon rate=coupon/par value=91.57/1000=9.157%

4. Remember that the paymnets are semi-annual

=PV(rate,nper,pmt,fv,type)

rate=10.2%/2=5.1%

nper=2*30=60

pmt=semi-annual coupon=(6.7%*1000)/2=67/2=33.5

fv=1000

=PV(5.1%,60,33.5,1000,0)=$674.21

Current Price=$674.21