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# Copy of 280278 - Week 3 Problem Set Solutions 5-1 Bond...

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Week 3 Problem Set Solutions 5-1: Bond Valuation with Annual Payments. Jackson Corporations bonds have 12 years remaining to maturity. Interest is paid annually, the bonds ha coupon interest rate is 8%. The bonds have a yield to maturity of 9%. What is the current market price of The current price is the PV of interest and principal. We use the PV function to calculate the current price Maturity 12 years Par value 1,000 Annual Interest 80 YTM 9% Current Price \$928.39 5-2: Yield to Maturity for Annual Payments. Wilson Wonders bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a coupon interest rate is 10%. The bonds sell at a price of \$ 850. What is their yield to maturity? The YTM is the discounting rate that will make the present value of interest and principal equal to the price today. We use the RATE function to calculate the YTM Maturity 12 Par value 1,000 Annual Interest 100 Price 850 YTM 12.48% 5-3: Current Yield for Annual Payments. Heath Foods bonds have 7 years remaining to maturity. The bonds have a face value of \$ 1,000 and a y pay interest annually and have a 9% coupon rate. What is their current yield? Current Yield is Annual Interest / Price We first calculate the price The current price is the PV of interest and principal. We use the PV function to calculate the current price Maturity 7 years Par value 1,000 Annual Interest 90 YTM 8% Current Price \$1,052.06 Current Yield 8.55% 5-7: Bond Valuation with Semiannual Payments. Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds matur of \$ 1,000, and a yield to maturity of 8.5%. What is the price of the bonds? The current price is the PV of interest and principal. We use the PV function to calculate the current price Maturity 16 semi annual period Par value 1,000 Semi annual Interest 50 Semi annual YTM 4.25% Current Price \$1,085.80 5-8: Yield to Maturity and Call with Semiannual Payments. Thatcher Corporations bonds will mature in 10 years. The bonds have a face value of \$ 1,000 and an 8%

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semiannually. The price of the bonds is \$ 1,100. The bonds are callable in 5 years at a call price of \$ 1,0 maturity? What is their yield to call? The YTM is the discounting rate that will make the present value of interest and principal equal to the price today. We use the RATE function to calculate the YTM Coupon interest 40 Semi annual Price 1,100 Face Value 1,000 Periods to Maturity 20 Semi annual YTM 6.62% The YTC is the discounting rate that will make the interest and call price equal to the price today Coupon interest 40 Semi annual Price 1,100 Call Price 1,050 Period to Call 10 Semi annual YTC 6.49% 6-1: Portfolio Beta. An individual has \$ 35,000 invested in a stock which has a beta of 0.8 and \$ 40,000 invested in a stock w the only two investments in her portfolio, what is her portfolios beta?
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Copy of 280278 - Week 3 Problem Set Solutions 5-1 Bond...

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