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Copy of FM12 Ch 05 P24 Build a model

# Copy of FM12 Ch 05 P24 Build a model - Chapter 5 Ch 05 P24...

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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 5-12 using a spreadsheet. After completing questions a through d, answer the new question. A 10-year 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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