ch7hw - Chapter 7 Homework Solutions 5. Here we need to...

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5. Here we need to find the coupon rate of the bond. All we need to do is to set up the bond pricing equation and solve for the coupon payment as follows: P = $870 = C (PVIFA 7.5%,16 ) + $1,000(PVIF 7.5%,16 ) Solving for the coupon payment, we get: C = $60.78 The coupon payment is the coupon rate times par value. Using this relationship, we get: Coupon rate = $60.78 / $1,000 = .0608 or 6.08% 6. To find the price of this bond, we need to realize that the maturity of the bond is 10 years. The bond was issued one year ago, with 11 years to maturity, so there are 10 years left on the bond. Also, the coupons are semiannual, so we need to use the semiannual interest rate and the number of semiannual periods. The price of the bond is: P = $39(PVIFA 4.3%,20 ) + $1,000(PVIF 4.3%,20 ) = $947.05 7. Here we are finding the YTM of a semiannual coupon bond. The bond price equation is: P = $1,040 = $46(PVIFA R% ,20 ) + $1,000(PVIF R% ,20 ) Since we cannot solve the equation directly for R , using a spreadsheet, a financial calculator, or trial
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This note was uploaded on 07/14/2008 for the course COM 390 taught by Professor Wilson during the Spring '08 term at Metro State.

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ch7hw - Chapter 7 Homework Solutions 5. Here we need to...

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