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Coupon Bond Practice Problems (See Ch12)

Coupon Bond Practice Problems (See Ch12) - UNIVERSITY OF...

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UNIVERSITY OF ILLINOIS College of Business - Department of Finance Finance 300 (Financial Markets) Coupon Bond Prices Face Value (FACE) Coupon Rate (CR) Market Rate (YTM) Maturity (t) # Coupons (n) 1000 0.06 0.08 5 Annual 1 2 3 [1 * 2] + 3 1/[1+YTM/n)^(t*n)] 1-[1/(1+YTM/n)^(t*n)] [C (\$)]/[YTM/n] Face/[(1+YTM/n)^(t*n)] Bond Price 0.680583197 0.319416803 \$750.00 \$680.58 \$920.15 Year # Coupon (C\$) PV (C\$) 1 \$60.00 \$55.56 2 \$60.00 \$51.44 3 \$60.00 \$47.63 4 \$60.00 \$44.10 5 \$60.00 \$40.83 Face Value = \$1,000.00 \$680.58 Bond Price (∑ PVCF) = \$920.15 Years to Maturity Coupon Rate % Market Rate (YTM %) Current Yield 5.00 6.00% 8.00% 6.52% UNIVERSITY OF ILLINOIS

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College of Business - Department of Finance Finance 300 (Financial Markets) Coupon Bond Prices Face Value (FACE) Coupon Rate (CR) Market Rate (YTM) Maturity (t) # Coupons (n) 1000 0.06 0.04 5 Semi-Annual 1 2 3 [1 * 2] + 3 1/[1+YTM/n)^(t*n)] 1-[1/(1+YTM/n)^(t*n)] [C (\$)]/[YTM/n] Face/[(1+YTM/n)^(t*n)] Bond Price 0.8203483 0.1796517 \$1,500.00 \$820.35 \$1,089.83 (n) Coupon (C\$) PV (C\$) 1 2 3 4 5 6 7 8 9 10 Face Value = \$1,000.00 Bond Price (∑ PVCF) = Years to Maturity Coupon Rate % Market Rate (YTM %) Current Yield 5.00 6.00% 4.00% UNIVERSITY OF ILLINOIS College of Business - Department of Finance Finance 300 (Financial Markets)

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