6 percent annual coupon, 4 year
Zero-coupon, 10 year
Zero-coupon, 4 year
6 percent annual coupon, 10 year
Refer to section 6.1.
Topic: Interest rate risk
App Store Co. issued 15-year bonds one year ago at a coupon rate of 7.1 percent. The bonds make
If the YTM on these bonds is 5.4 percent, what is the current bond price?
(Do not include the dollar
sign ($). Round your answer to 2 decimal places (e.g., 32.16).)
Current bond price
1,165.51 ± 1%
To find 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.
The price of the bond is:
P = $35.50(PVIFA
) + $1,000(PVIF
P = $1,165.51
14 × 2
5.4% / 2
±$71 / 2
Suppose the following bond quote for IOU Corporation appears in the financial page of today’s
newspaper. Assume the bond has a face value of $1,000,
and the current date is April 15,
Apr 15, 2030
What is the yield to maturity of the bond?
(Do not include the percent sign (%). Round your answer to
2 decimal places (e.g., 32.16).)
Yield to maturity
10.51 ± 1%
What is the current yield?
(Do not include the percent sign (%). Round your answer to 2 decimal
places (e.g., 32.16).)
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