BondsCynthiaKeithOct09

BondsCynthiaKeithOct09 - 10,000 U.S. Treasury 5.00% 10/1/19...

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Unformatted text preview: 10,000 U.S. Treasury 5.00% 10/1/19 10,000 Dow Chemical 6.125% 10/1/19 10,000 Maryland 5.75% 10/1/19 10,000 Wells Fargo 0% 10/1/19 10,000 Prince Georges Co 4.75% MD 10/1/19 (callable 10/1/14 at 102) 10,000 Dow Chemical 6.125% 10/1/19 Moody’s – Baa3 S&P - BBB 10,000 General Electric 6.125% 10/1/19 Moody’s Aaa S&P - AAA Annual Income Before Taxes After Taxes** 10,000 Dow 6.125% 10/1/19 $612.50 $441.00 10,000 MD 5.75% 10/1/19 $575.00 $575.00 **Assume: Federal tax bracket = 28%** 10,000 Dow Chemical 6.125% 10/1/19 $12,000.00 $10,000.00 $8,000.00 $6,000.00 $4,000.00 $2,000.00 $0.00 1 2 3 4 5 6 7 8 9 10 10,000 Wells Fargo 0% 10/1/19 $10,000.00 $8,000.00 $6,000.00 $4,000.00 $2,000.00 $0.00 1 2 3 4 5 6 7 8 9 10 10,000 Prince Georges Co MD 4.75% 10/1/19 callable 10/1/14 @ 102 $12,000.00 $10,000.00 $8,000.00 $6,000.00 $4,000.00 $2,000.00 $0.00 1 2 3 4 5 6 7 8 9 10 10,000 Dow 6.125 10/1/19 Assume: rd = 6.125, today is 10/1/09 Calculator entries: N = 20 FV = 10,000 PMT = 306.25 I/YR = 3.0625 Compute PV = 10,000 (or 100.00) 10,000 Dow 6.125 10/1/19 Assume: rd = 7.14%, today is 10/1/09 Calculator entries: N = 20 FV = 10,000 PMT = 306.25 I/YR = 3.57 Compute PV = 9,283.27 (or 92.8327) 10,000 Dow 6.125 10/1/19 Assume today is 10/1/09 If rd = 5.84% then current yield = ? 612.50/10,213.58 = 6.00% If rd = 7.14% then current yield = ? 612.50/9,283.27 = 6.60% If rd = 6.125% then current yield = ? 612.50/10,000 = 6.125% 10,000 Dow 6.125 10/1/19 Assume: rd = 5.84%, today is 10/1/09 Calculator entries: N = 20 FV = 10,000 PMT = 306.25 I/YR = 2.92 Compute PV = 10,213.58 (or 102.1358) 10,000 Wells Fargo 0% 10/1/19 Assume: rd = 5.84%, today is 10/1/09 Calculator entries: N = 20 FV = 10,000 PMT = 0 I/YR = 2.92 Compute PV = $5623.47 (or 56.2347) 10,000 Dow 6.125% 10/1/19 Assume today is 10/1/09 Price = 102.1358 What is the YTM? ...
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This note was uploaded on 02/22/2011 for the course BMGT 340 taught by Professor White during the Spring '08 term at Maryland.

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BondsCynthiaKeithOct09 - 10,000 U.S. Treasury 5.00% 10/1/19...

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