Please write out formula and steps A bond is currently sold at $980, it has 20...

Please write out formula and steps

A bond is currently sold at $980, it has 20 years to maturity and 9% coupon rate. The bond will be called in 5 years, the bond will be called at a premium of $1,050 of $1,050, what is the yield to call?

Solutions

Expert Solution

Face value	$1,000
Coupen annually	9%

Coupen amount	$90

RemainingMaturity years	15

Bond Price	$1,050.00

YTM :

Price of bond =	Coupen * PVAF( YTM, Maturity) + Redemption value * PVF( YTM,Maturity)



Here bond price is greater than face value hence YTM be less than Coupen rate
Therefore lets assume YTM be 8%

Price of bond =	90PVAF(8%,15) + 1000PVF(8%,15)
	908.5595+1000.3152
	1085.555

at coupen rate price of bond will be same as face value that is $1000

There fore YTm is between 8% and 9%

YTM =	8% +{ (1085.555-1050/(1085.555-1050)+ (1050-1000) } *(9-8)
	8% + 35.555/85.555
	8.42%

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

An investor purchased a bond one year ago for $980. He received $17 in interest and sold the bond for $987.

*PLEASE SHOW ALL WORK FOR EVERY QUESTION* QUESTION 1: An investor purchased a bond one year ago for $980. He received $17 in interest and sold the bond for $987. What is the holding-period return on his investment? Note: Express your answer as a percentage with no percentage sign. QUESTION 2: The stock of company XYZ currently trades at $190 and just paid a dividend of $3.8. Suppose that your expectations regarding the stock price and dividends next year are...

A $1,000 par value 8-year bond with a 13 percent coupon rate recently sold for $980....

A $1,000 par value 8-year bond with a 13 percent coupon rate recently sold for $980. What is the yield to maturity if the bond makes semiannual payments? Submit your answer as a percentage rounded to two decimal places. Describe and interpret the assumptions related to the problem. Apply the appropriate mathematical model to solve the problem. Calculate the correct solution to the problem. Consider a 7 year bond with face value $1,000 that pays an 8.4% coupon semi-annually and...

Please show your working and formula (If possible) -------------------------- Suppose you take out an $840,000, 20-year...

Please show your working and formula (If possible) -------------------------- Suppose you take out an $840,000, 20-year mortgage loan to buy a residential apartment. The interest rate on the mortgage is 4.65% per annum, and payments are required to be made annually at the end of each year. Question: Construct a mortgage amortisation table showing loan balance at the beginning of each period, annual repayment amount, interest payment, the amortisation of the loan and the loan balance for each year.

I'm using this to study for an exam, please write out all steps and include formulas,...

I'm using this to study for an exam, please write out all steps and include formulas, thank you! The world's fastest land animal, the cheetah, can accelerate at 8.75 m/s2 to a top speed of vcmax = 30.5 m/s. A cheetah observes a passing gazelle traveling at vg = 19.1 m/s and begins to chase it. (a) How long, in seconds, does it take the cheetah to reach its maximum velocity, vcmax, assuming its acceleration is constant? (b) How far,...

write 20 names and molecular formula for inorganic chemicals

. A 20-year, $1,000 par value bond has a 7% annual payment coupon. The bond currently...

. A 20-year, $1,000 par value bond has a 7% annual payment coupon. The bond currently sells for $780. If the yield to maturity remains at the current rate, what will the price be 10 years from now?

A 20-year, $1,000 par value bond has a 6.4% annual payment coupon. The bond currently sells...

A 20-year, $1,000 par value bond has a 6.4% annual payment coupon. The bond currently sells for $1,080. If the yield to maturity remains at its current rate, what will the price be 4 years from now? A 7 percent corporate bond that pays interest semi-annually was issued last year. Which two of the following most likely apply to this bond today if the current yield-to-maturity is 6 percent? I. a structure as an interest-only loan II. a current yield...

A 20-year, $1,000 par value bond has 9.5% annual payment coupon. The bond currently sells for...

A 20-year, $1,000 par value bond has 9.5% annual payment coupon. The bond currently sells for $905. If the yield to maturity remains at its current rate, what will the price be 5 years from now? (Answer to the nearest cent, xxx.xx and enter without the dollar sign )

A 5% perpetuity bond has a prince of $980 its YTM=5.10%. Suppose you are holding the...

A 5% perpetuity bond has a prince of $980 its YTM=5.10%. Suppose you are holding the bond to partially offset an obligation in 11 years. How much will you have from holding this bond and selling it in 11 years?

Madison Square Stores has a $20 million bond issue outstanding that currently has a market value...

Madison Square Stores has a $20 million bond issue outstanding that currently has a market value of $19.4 million. The bonds mature in 6.5 years and pay semiannual interest payments of $35 each. What is the firm's pretax cost of debt? 7.74 percent 7.80 percent 7.59 percent 7.08 percent 8.21 percent

Subjects