Chapter_3_H_W_solutions

# Chapter_3_H_W_solutions - =\$3,746.06 The coupon payments =...

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1 Problem 3.2 Effective Annual Yield = (1 + periodic interest rate ) m – 1 Effective annual yield = (1.043) 2 – 1 = 0.087849 or 8.785% Problem 3.7 b y = 4.5385% The annual YTM, or the Bond Equivalent Yield = 4.5385% x 2 = 9.077%. b. b y = 4.3965% The annual yield to call = 4.3965% x 2 = 8.793%. 2 18 2 18 ) 1 ( 000 , 1 \$ ) 1 ( 1 1 55 169 , 1 \$ x x B y y y P + + + - = = 2 13 2 13 ) 1 ( 000 , 1 \$ ) 1 ( 1 1 55 169 , 1 \$ x x B y y y P + + + - = = Problem 3.7 (continued) c. b y = 3.4709% The annual yield to put = 3.4709% x 2 = 6.942%. d. If the bond is called in eight years at \$1,055 b YTC = 8.535% If the bond is called in 13 years at \$1,000 b YTC = 8.793% If the bond is put in five years at \$1,000 b YTP = 6.942% So; the yield to worst = 6.942% 2 5 2 5 ) 1 ( 000 , 1 \$ ) 1 ( 1 1 55 169 , 1 \$ x x B y y y P + + + - = = Problem 3.12 a. Total Future \$ = FV = P 0 (1 + r ) n = \$816(1 + 0.09/2) 2x20 = \$4,746.15 . b. The total coupon payments = n x C = 40(\$35) = \$1,400.00 . c. Coupon interest plus interest on interest Plus Principle: 06 . 746 , 4 \$ 000 , 1 \$ 06 . 746 , 3 \$ 000 , 1 \$ 045 . 0 1 ) 045 . 0 1 ( 35 40 = + = + - + = FV Problem 3.12 (Continued) d. The future value of the interest payment

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Unformatted text preview: =\$3,746.06 The coupon payments = \$1,400. b The interest on interest = \$2,346.06. e. Interest – on – Interest = 06 . 346 , 2 \$ 35 \$ 40 06 . 746 , 3 \$ 045 . 1 ) 045 . 1 ( 35 40 =-= -+ x Problem 3.16 The Coupon Interest plus Interest – on – interest = The expected price of bond after five years: 14 . 558 \$ 2 / 094 . 1 ) 2 / 94 . 1 ( 45 2 5 = -+ = x FV 53 . 961 \$ ) 2 / 112 . 1 ( 000 , 1 \$ ) 2 / 112 . 1 ( 1 1 2 / 112 . 45 2 2 2 2 = + + +-= x x B P 2 Problem 3.16 (continued) • The semiannual total (horizon) return : b The total (horizon) return = 4.27% x 2 = 8.55% h B r P Dollars Future Total h / 1 _ _ = % 27 . 4 1 000 , 1 \$ 53 . 961 14 . 558 \$ 10 / 1 =- + = r h...
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Chapter_3_H_W_solutions - =\$3,746.06 The coupon payments =...

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