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Excel Solutions - Chapter 07

# Excel Solutions - Chapter 07 - Chapter 7 Problems 1-32...

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Chapter 7 Problems 1-32 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green

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Chapter 7 Question 1 Input area: Coupon 10% Required rate of return 8% Output area: The yield to maturity is the required rate of return on a bond expressed as a nominal annual interest rate. For noncallable bonds, the yield to maturity and required rate of return are interchangeable terms. Unlike YTM and required return, the coupon rate is a fixed percentage of par over the life of the bond used to set the coupon payment amount. For the example given, the coupon rate on the bond is still 10% , and the YTM is 8% .
Chapter 7 Question 2 Output area: Price and yield move in opposite directions; if interest rates rise, the price of the bond will fall. This is because fixed coupon payments determined by the fixed coupon rate are not as valuable when interest rates rise--hence, the price of the bond decreases.

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Chapter 7 Question 3 Input area: Settlement date 1/1/2005 Maturity date 1/1/2015 Coupon rate 8% Coupons per year 1 Face value \$100 Yield to maturity 6% Output area: Price \$1,147.20
Chapter 7 Question 4 Input area: Settlement date 1/1/2005 Maturity date 1/1/2014 Annual coupon rate 9% Coupons per year 1 Face value (% of par) 100 Bond price (% of par) 88.450 Output area: Yield to maturity = 11.09%

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Chapter 7 Question 5 Input area: Years to maturity 16 Coupons per year 1 Face value \$1,000 Bond price 870 Yield to maturity 6.80% Output area: Present value of final payment = \$349.03 Present value of coupon payments = \$520.97 Coupon payment = \$54.42 Coupon rate = 5.44%
Chapter 7 Question 6 Input area: Settlement date 1/1/2005 Maturity date 1/1/2015 Coupon rate 8.20% Coupons per year 2 Face value \$100 Yield to maturity 7.40% Output area: Price \$1,055.83

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Chapter 7 Question 7 Input area: Settlement date 1/1/2005 Maturity date 1/1/2015 Annual coupon rate 8.60% Coupons per year 2 Face value (% of par) 100 Bond price (% of par) 97 Output area: Yield to maturity = 9.06%
Chapter 7 Question 8 Input area: Years to maturity 14.5 Coupons per year 2 Face value \$1,000 Bond price 1,145 Yield to maturity 7.5% Output area: Present value of final payment = \$343.83 Present value of coupon payments = 801.17 Coupon payment = 45.79 Coupon rate = 9.16%

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Chapter 7 Question 9 Input area: Treasury rate 6.00% Inflation rate 4.50% Output area: Approximate real rate 1.50% Exact real rate 1.44%
Chapter 7 Question 10 Input area: Real rate 4.00% Inflation rate 2.50% Output area: Treasury rate = 6.60%

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Chapter 7 Question 11 Input area: Investment return 15% Real return 9% Output area: Inflation rate 5.50%
Chapter 7 Question 12 Input area: Total return 13.40% Inflation rate 4.50% Output area: Real return 8.52%

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Question 13 Input area:
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Excel Solutions - Chapter 07 - Chapter 7 Problems 1-32...

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