11/24/2006
Chapter 5.
Ch 05 P24 Build a Model
a.
What is the bond's yield to maturity?
Basic Input Data:
Years to maturity:
10
Periods per year:
2
Periods to maturity:
20
Coupon rate:
12%
Par value:
$1,000
Periodic payment:
$60
Current price
$1,100
Call price:
$1,060
Years till callable:
4
Periods till callable:
8
YTM
=
10.37%
quoted.
b.
What is the bond's current yield?
Current yield
=
10.91%
c.
What is the bond's capital gain or loss yield?
Cap. Gain/loss yield =
0.54%
d.
What is the bond's yield to call?
Here we can again use the Rate function, but with data related to the call.
YTC
=
10.15%
quoted.
Rework Problem 512 using a spreadsheet.
After completing questions a through d, answer the new question.
A
10year 12 percent semiannual coupon bond, with a par value of $1,000, may be called in 4 years at a call price of
$1,060.
The bond sells for $1,100.
(Assume that the bond has just been issued.)
Work parts a through d with a spreadsheet.
You can also work these parts with a calculator to check your spreadsheet
answers if you aren't confidient of your spreadsheet solution.
You must then go on to work the remaining parts with the
spreadsheet.
This is a
nominal rate,
not the effective rate.
Nominal rates are generally
Note that this is an
economic loss
, not a loss for tax purposes.
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 Spring '10
 KATZ
 YTM

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