Question

9- A 11​-year bond pays interest of $ 28.60semiannually, has a face value of $ 1000 and is selling for $772.07. What are its annual coupon rate and yield to​ maturity?

13- Cyberdyne Systems is issuing a series of zero coupon bonds to raise​ $500M to fund research and development at its Skynet division. Each bond will have a face value of ​$1,000 and will mature in 19 years. The yield on the bond is 4.5​%. What is the fair price for one of​ Cyberdyne's zero coupon​ bonds?

8-Beam Inc. bonds are trading today for a price of ​$401.25The bond currently has 25years until maturity and has a yield to maturity of 8.21​%. The bond pays annual coupons and the next coupon is due in one year. What is the coupon rate of the​ bond?

6-​Man-zeer Inc.,​ (a Kramer/Costanza joint​ venture) bonds are currently trading at ​$422.13 The bonds have a face value of $ 1000 a coupon rate of 11​% with coupons paid​ semiannually, and they mature in 2020 years. What is the yield to maturity of the​ bonds?

7- What is the yield to maturity of a 9.2 semiannual coupon bond with a face value of $1000 selling for $860.94 that matures in 9 years.

3- Iron Maiden became the first​ heavy-metal band to sell bonds when it arranged a​ $30 million deal in February 1999. The collateral on the bonds​ (and source of cash flow for interest and principal​ payments) consisted of future royalties from the​ band's albums like​ "The Number of the​ Beast." Each bond in the issue had a face value of ​$1,000​, a term of 1717 years and paid semiannual coupons at the rate of 77​%.The yield to maturity on the bond was 55​%. At what price did each of the bonds​ sell?

5- With celebrity​ bonds, celebrities raise money by issuing bonds to investors. The royalties from sales of the music are used to pay interest and principal on the bonds. In April of​ 2009, EMI announced that it intended to securitize its back catalogue with the help of the Bank of Scotland. The bond was issued with a coupon rate of 6.8​% and will mature on this day 21years from now. The yield on the bond issue is currently 6.25​%. At what price should this bond trade​ today, assuming a face value of $1,000 and annual​ coupons?

Answer 1

Solution:

All are separate question, so I am giving the solution Problem 9 since it is written at the top.

Problem 9

Yield to maturity

1. It is the available rate of return from bond if it is purchased and hold till maturity period.
2. YTM is such discount rate at which PV of future inflow of bond will equal to the amount invested in such bond (i.e. PV of Outflow)
3. It is similar to IRR. Also known as available rate of return from bond

Semi-annual coupon rate = Semi annual interest / Face Value x 100 = 28.60 / 1000 x 100 = 2.860%

Annual Coupon Rate = Semi Annual Coupon Rate x 2 = 2.86*2 = 5.72%

Yield To Maturity = (Semiannual Coupon Interest + (Face Value – Issue Price) / Semi annual period to maturity) / (Face Value + Issue Price)/2

= ($28.60 + (1000 – 772.07) / 11*2) / (1000 + 772.07)/2

= ($28.60 + $10.3605) / 886.035

= 0.04397 or 4.397% semi annual

Annual Yield To Maturity = 4.397*2 = 8.794%

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts.