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

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
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.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
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
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

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

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online