# BaM-Ch04 - Chapter 4 Ch04 P24 Build a Model Rework Problem...

This preview shows page 1. Sign up to view the full content.

Chapter 4. Ch04 P24 Build a Model a. What is the bond's yield to maturity? Basic Input Data: Years to maturity: 10 Periods per year: 2 Periods to maturity: Coupon rate: 12% Par value: \$1,000 Periodic payment: Current price \$1,100 Call price: \$1,060 Years till callable: 4 Periods till callable: YTM = quoted. b. What is the bond's current yield? Current yield = c. What is the bond's capital gain or loss yield? Cap. Gain/loss yield = d. What is the bond's yield to call? Here we can again use the Rate function, but with data related to the call. YTC = quoted. NOW ANSWER THE FOLLOWING NEW QUESTIONS: Nominal market rate, r: 12% Value of bond if it's not called: Value of bond if it's called: The bond would not be called unless r<coupon rate = 12%. We can use the two valuation formulas to find values under different r's, in a 2-output data table, and then use an IF statement to determine which value is appropriate: Value of Bond If: Actual value, Hint: Use function Wizard and pick IF function. Not called Called considering Rate, r \$0.00 \$0.00 call likehood: 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% We can graph the above data to get another idea of the bond's price sensitivity.
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern