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Ch 07 Inclass Exercises Solutions
1. Suppose you are looking at a bond that has a 10% annual coupon and a face value of $1000. There are 20 years to
maturity and the yield to maturity is 8%. What is the price of this bond? (1,196.36)
Annual Coupon Bonds
Find Current Price
Coupon Rate
10.00%
Years
20
YieldtoMaturity (YTM)
8.00%
Face Value
1,000
# of periods
20
Coupon Payment per period
100
Period rate
8.0000%
APR
8.00%
EAR
8.00%
Current Price
1,196.36
2. Suppose you are looking a 7 year semiannual coupon bond with a coupon rate of 14% and priced to yield 16% to
maturity.
What is the price of this bond? (917.56)
Semiannual Coupon Bonds
Find Current Price
Coupon Rate
14.00%
Years
7
YieldtoMaturity (YTM)
16.00%
Face Value
1,000
# of periods
14
Coupon Payment per period
70
Period rate
8.0000%
APR
16.00%
EAR
16.64%
Current Price
917.56
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3. Consider a bond with a 10% annual coupon rate, 15 years to maturity and a par value of $1,000.
The current price is $928.09.
What is the implied yield to maturity?
(11%)
Find Yield to Maturity (YTM)
Current Price
928.09
Coupon Rate
10.00%
Years
15
Face Value
1,000
# of periods
15
Coupon Payment per period
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 Fall '11
 Linney
 Finance

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