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Unformatted text preview: 5-1 Bond Valuation with Annual PaymentsJackson Corporations bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds?Using Excel Fx formula:Interest0.09# of years12PMT80=0.08*1000FV1000Formula=PV(I,NPMT,FV,0)PV($928.39)5-2 YTM for Annual Payments Wilson Wonderss bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity?Using Excel Fx Formula:# of years12PV-850PMT100=0.1*100FV1000YTM=R=RATE(N,PMT,PV,FV,0)YTM12.48%5-6 Maturity Risk Premium The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years. A 2-year Treasury security yields 6.3%. What is the maturity risk premium for the 2-year security?...
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This note was uploaded on 10/02/2011 for the course ACCOUNTING 310 taught by Professor Ritchie during the Spring '09 term at Long Island U..
- Spring '09