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chap 7

# chap 7 - Ch 7 Bonds Bond Valuation Callaghan bonds have 10...

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Ch 7 Bonds Bond Valuation: Callaghan bonds have 10 yrs remaining to maturity. Interest is paid annually, they have a \$1000 par value, the coupon interest rate is 8% and the yield to maturity is 9%. What is the bond price? A: N = 10; I/YR = YTM = 9%; PMT = 0.08 1,000 = 80; FV = 1000; PV = VB = ? PV = \$935.82. Yield to maturity and future price : A bond has a \$1000 par value, 10 yrs to maturity and a 7% annual coupon and sells for \$985. a. What is the ield to maturity (YTM)? b. Assume the YTM remains constant for the nest 3 yrs. What will the price for 3 yrs from today? a. N = 10; PV = -985; PMT = 70; FV = 1000; YTM = ? Solve for I/YR = YTM = 7.2157% 7.22%. b. N = 7; I/YR = 7.2157; PMT = 70; FV = 1000; PV = ? Solve for V B = PV = \$988.46. Bond valuation : Nung Corp. outstanding bonds have a \$1000 par value a 9% semiannual coupon, 8 yrs to maturity, and a 8.5% YTM. What is the bond price? The problem asks you to find the price of a bond, given the following facts: N = 2 × 8 = 16; I/YR = 8.5/2 = 4.25; PMT = 45; FV = 1000. With a financial calculator, solve for PV = \$1,028.60. YIELD TO MATURITY
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