Solution - chapter 7

# Solution - chapter 7 - CHAPTER 7 ANSWERS AND SOLUTIONS 2...

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CHAPTER 7 ANSWERS AND SOLUTIONS 2, Bond valuation Answer: c EASY Coupon rate 6% PMT \$60 calculated N 15 I/YR 8% PV \$828.81 FV \$1,000.00 4, Current yield Answer: b EASY N 20 I/YR 8.99% = YTM PV \$1,275 PMT \$120 FV \$1,000 5, Yield to call Answer: d EASY N 5 I/YR 7.31% = YTC PV \$1,275 PMT \$120 FV \$1,120 8, Yields to maturity and call Answer: a MEDIUM If held to maturity … If called in 5 years … Par value \$1,000.00 Par value \$1,000.00 Coupon 8% Coupon 8% N 20 N 5 I/YR 7.51% = YTM I/YR 8.74% = YTC PV \$1,050.00 = must be equal = PV \$1,050.00 PMT \$80 = must be equal = PMT \$80 FV \$1,000.00 FV \$1,120.00 Expected rate of return: 7.51% = YTC The firm will choose the alternative that requires it to pay the "lesser" yield.

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10, Bond valuation - semiannual coupons Answer: d MEDIUM Par value \$1,000.00 Coupon rate 7.00% Periods/year 2 Yrs to Mat. 15 N=periods 30 Annual rate 6.00% Periodic rate 3.00% PV \$1,098.00 PMT/period \$35 FV \$1,000.00 14, Yields to maturity and call Answer: b MEDIUM/HARD Coupon rate
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Solution - chapter 7 - CHAPTER 7 ANSWERS AND SOLUTIONS 2...

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