Chapter 6, Problem 6
To fnd the price oF this bond, we need to realize that the maturity oF the bond is 14 years. The
bond was issued one year ago, with 15 years to maturity, so there are 14 years leFt on the
bond. Also, the coupons are semiannual, so we need to use the semiannual interest rate and
the number oF semiannual periods.
14 * 2 = 28
→
N
coupon rate oF 6.1% oF $1,000 = $61 per year or halF that For a semiannual payment.
61/2 = 30.5
→
PMT
yield to maturity (YTM) oF 5.30% means 5.3/2 = 2.65 as semiannual interest rate
→
I/Y
iF no par value For bond is given always assume $1,000, which is the Future value:
1000
→
±V
now compute For
CPT
PV
→
−
1078.37
Sanity check: YTM is lower than coupon rate
→
premium bond $1,078.37 > $1,000
✔
Chapter 6, Problem 7
Here, we are fnding the YTM oF a semiannual coupon bond.
Periods (
N
): 2 * (15  2) = 26
Payment (
PMT
): 8.4% oF $1,000 divided by 2 = 42
Present Value (
PV
): 108% oF
−
$1,000 =
−
1,080, this needs to be entered with a NEGATIVE
sign
±uture Value (
±V
): $1,000
CPT
I/Y
gives 3.71% For semiannual rate, 2 * 3.71% = 7.43%
Sanity check: Price is higher than par value
→
premium bond, which means YTM 7.43% must
be less than coupon rate oF 8.4%
✔
Chapter 6, Problem 8
Here, we need to fnd the coupon rate oF the bond.
Periods (
N
): 2*10.5 = 21
Interest Rate (
I/Y
): 9.4% / 2 = 4.70%
Present Value (
PV
):
−
$945
±uture Value (
±V
): $1,000
CPT
PMT
gives $42.82 payment For halF a year or $85.65 For Full year
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Winter '11
 Debruinne
 Finance, CPT PV

Click to edit the document details