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Problems Chapter 5
51. Corporation’s 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?
Par Value (or) Face value of the bond = $1,000
Interest Rate (or) Coupon Rate of the bond = 8%
Yield to Maturity of the bond = 9%
Number of years to Maturity of the bond = 12 years
Bond Value = [Present Value of the coupons + Present value of the
Face amount]
Annual Coupon Rate of the bond = 8%
Annual Coupon Payment of the bond = $1,000 * 8%
Annual Coupon Payment of the bond = $80
Bond Value = $80 * PVIFA (9%, 12) + $1,000 * PVF (9%, 12) =PV
(.09,12,,1000,0)
Bond Value = $80 * 7.1607 + $1,000 * 0.3555
Bond Value = $572.856 + $355.50
Bond Value = $928.35
Current Market Price for the bond = $928.35
52. Wilson Wonders's 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?
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 Spring '11
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 Interest, Interest Rate

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