100038050_HW4 - Current yeild YTM effective annual yeild...

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Problem 10 Miryang: premium bond, 8% coupon, semiannual payments, YTM of 6%, 13 years to maturity Yeosu: discount bond, semiannual payments, 6% coupon, YTM of 8%, 13 years to maturity Interest rates remain unchanged. Price in 1, 3, 8, 12, 13 years from now Solution Miryang: Price of the bond today: P0 = $1,178.77 Price of the bond one year from now: P1 = $1,141.12 Price of the bond three years from now P3 = $1,148.77 Price of the bond eight years from now P8 = $1,085.30 Price of the bond 12 years from now P12 = $1,019.13 Price of the bond 13 years from now P13 = $1,000.00 Yeisu: Price of the bond today: P0 = $840.17 Price of the bond one year from now: P1 = $847.53 Price of the bond three years from now P3 = $864.10 Price of the bond eight years from now P8 = $918.89 Price of the bond 12 years from now P12 = $981.14 Price of the bond 13 years from now P13 = $1,000.00 Problem 11 8.4% coupon bonds, 9 years to maturity, semiannual payments, sell for 104% of par
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Unformatted text preview: Current yeild, YTM, effective annual yeild? Solution $1,040.00 = 0.084 * 1,000/2 [(1 - 1/(1 + y/2)^18)/y/2] + 1 T T R R C R C R C PV ) 1 ( 000 , 1 ) 1 ( ... ) 1 ( 1 2 + + + + + + + + = $- $200.00 $400.00 $600.00 $800.00 $1,000.00 $1,200.00 $1,400.00 Tim Bond Price T T R C PV 000 , 1 ) 1 ( 1 1 + +-= PV = $1,040 for YTM = 3.887% (semiannua Current yeild = 84/1040 = 8.08% Effective annual yeild = (1 + Periodic interest payment)^k -Problem 12 8% coupon bonds, price $1,095, semiannual payments, mature in 20 years Coupon rate to sell at par ? $1,095 = 0.08 * 1,000/2 [(1 - 1/(1 + y/2)^40)/y/2] + 1,000/(1+y/2)^40 PV = $1,095 for YTM = 7.103% To sell at par the coupon rate should be the same as the yeild to maturity that is 7.103% T R R ) 1 ( + 1,000/(1+y/2)^18 Bonds Miryang: Yeisu: ime to Maturity al) and 7.774% annual- 1 = (1.03887)^2 - 1 = 7.925%...
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100038050_HW4 - Current yeild YTM effective annual yeild...

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