Preview

Bond's Yield to Maturity

Satisfactory Essays
Open Document
Open Document
431 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Bond's Yield to Maturity
| | | | | | |2008/3/8 | | | | | | | | | | | | | | | | | | | | | | | | | | | |Chapter 4. Ch04 P24 Build a Model | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |Rework Problem 4-12 using a spreadsheet. After completing questions a through d, answer the new question. A 10-year 12 percent semiannual coupon bond, with a par value of $1,000, may be called in 4 years at a call price of $1,060. The bond sells for $1,100. (Assume that the bond has just been issued.) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |Work parts a through d with a spreadsheet. You can also work these parts with a calculator to check your spreadsheet answers if you aren't confidient of your spreadsheet solution. You must then go on to work the remaining parts with the spreadsheet. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |a. What is the bond's yield to maturity? | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |Basic Input Data: | | | | | | | | | | | | | | | | |Years to maturity: |10 | | | | | | | | | | | | | | | |Periods per year: |2 | | | | | | | | | | | | | | | |Periods to maturity: |20 | | | | | | | | | | | | | | | |Coupon rate: |12% | | | | | | | | | | | | | | | |Par value: | |$1,000 | | | | | | | | | | | | | | | |Periodic payment: |$60 | | | | | | | | | | | | | | | |Current price |$1,100 | | | | | | | | | | | | | | | |Call price: | |$1,060 | | | | | | | | | | | | | | | |Years till callable: |4 | | | | | | | | | | | | | | | |Periods till callable: |8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |YTM = |5.18% | |This is a nominal rate, not the effective rate. Nominal rates are generally | | | | | | | | | | | | |quoted. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |b. What is the bond's current yield? | | | | | | | | | | | | | | | | | | | | | |
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Acct 551 Week 1 Assignment
    • 645 Words
    • 3 Pages

    Acct 551 Week 1 Assignment

    20% Related premium ($48,000x20%) = $9,600 C. March 31, 2013 Interest expense 11,700 Premium on bond payable 300 (9,600/ 8 years) x3/12 Interest payable ($600,000x8%x3/12) 12,000 March 31, 2013 Bonds payable 600,000 Premium on bond payable 9,300 Common stock 480,000 Paid in capital in excess of par-common stock 129,300 Calculation: Premium as of Jan 1, 2013 for $600,000 of bonds $9,600; = 9,600/8 years remaining x 3/12 = $300 Premium as of march 31, 2013 for $600,000 of bonds $9,300 D.…

    • 645 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    ACC 291 Week 3 Reflection Summary
    • 677 Words
    • 4 Pages

    ACC 291 Week 3 Reflection Summary

    On January 1, Flory Company issued $300,000, 8%, 5-year bonds at face value. Interest is payable semiannually on July 1 and January 1…

    • 677 Words
    • 4 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    ECON 333 Study Guide
    • 1190 Words
    • 5 Pages

    ECON 333 Study Guide

    Be sure that you can calculate yield to maturity, current yield and holding period return…

    • 1190 Words
    • 5 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Acct 551 Final Exa1
    • 635 Words
    • 3 Pages

    Acct 551 Final Exa1

    The bonds were issued on December 31, 2008 at 95, with interest payable on June 30 and December 31. (Use straight-line amortization.)…

    • 635 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Fin 516 Quiz 2
    • 932 Words
    • 4 Pages

    Fin 516 Quiz 2

    | (a) $278,606 Cost of refunding: Call Premium = 5% (2mil) = 100,000 Floatation cost = 2% (2mil) = 40,000 Total investment outlay = 140,000 Interest on old bond = 7%/2(2mil) = 70,000 Interest on new bond = 5%/2(2mil) = 50,000 Savings = 20,000 PV of savings, 30 periods at 5%/2 = 418,606 NPV of refunding = PV of savings - cost of refunding = 278,606…

    • 932 Words
    • 4 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    General Host; Accounting for a Bond Refunding
    • 1214 Words
    • 5 Pages

    General Host; Accounting for a Bond Refunding

    4. Again assuming that 11% is the market rate, compute the present value at January 1, 1975 of the payments that General Host will make on the 11% bonds if they replace the 5% bonds.…

    • 1214 Words
    • 5 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    ADelpilar W4 Problem Set
    • 709 Words
    • 3 Pages

    ADelpilar W4 Problem Set

    Bond-6. A given bond has five years left to maturity. Interest is paid annually and the annual coupon rate is 9%. The par value of the bond is $1,000. The bond currently sells for $1,000. What is the yield to maturity?…

    • 709 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Finance and Par Value
    • 2436 Words
    • 10 Pages

    Finance and Par Value

    a. A bond that has a $1,000 par value and a contract or coupon interest rate of 11.4%. The bond is currently selling for a price of $1,122 and will mature in 10 years. The firm’s tax rate is 34%.…

    • 2436 Words
    • 10 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Accounting 202
    • 595 Words
    • 3 Pages

    Accounting 202

    On June 30, 2004, Marmet Company issued 12% bonds with a par value of $300,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2012. Because of lower interest rates and a significant change in the company’s credit rating, it was decided to call the entire issue on June 30, 2013, and to issue new bonds. New 10% bonds were sold in the amount of $800,000 at 102; they mature in 20 years. Marmet Company uses straight-line amortization. Interest payment dates are December 31 and June 30.…

    • 595 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Fin516 Midterm Wk 4
    • 181 Words
    • 2 Pages

    Fin516 Midterm Wk 4

    Inputs to find the straight-debt value: N = 10; I/YR = 8; PMT = 50; FV = 1,000. $798.70…

    • 181 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Cash Flow and Journal Entry
    • 642 Words
    • 4 Pages

    Cash Flow and Journal Entry

    The Bradford Company issued 10% bonds, dated January 1, with a face amount of $80 million on January 1, 2013. The bonds mature on December 31, 2022 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31.…

    • 642 Words
    • 4 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Chapter 11
    • 255 Words
    • 2 Pages

    Chapter 11

    1. Compute the yield to maturity and the after-tax cost of debt for the two bond issues.…

    • 255 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Vba Bond Function
    • 777 Words
    • 4 Pages

    Vba Bond Function

    I discussed after class some ideas as to how to go about building the Bond Price function. This is problem 4 of the first homework assignment. There are three functions that have to be built. This is stated in the problem. The three functions are a function to calculate the present value interest factor for a single value. The second function returns a calculation of the present value interest factor of an annuity. The third function utilizes the first two functions in calculating the fair value of a bond, and returns the fair value or the theoretical price of the bond given a required rate of return. The first step would be to name the three functions. We can go ahead and create “empty” or “shell” functions. Let’s assume we have decided to name the three functions: 1) BondFairValue() 2) PVIF() 3) PVIFA() So in our module, we make three shell functions. We know that each of the functions will have to return a value that includes decimals so we set to type “Single” the values the functions return. ‘ 1st Function Declaration Function BondFairValue() As Single BondFairValue = 0…

    • 777 Words
    • 4 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Fin 601 Final Exam - Multiple Choice Questions & Answers
    • 2431 Words
    • 10 Pages

    Fin 601 Final Exam - Multiple Choice Questions & Answers

    Given a bond with 8 years to maturity, $1000 face value, 8% coupon, 9% yield to…

    • 2431 Words
    • 10 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    corporate finance_bond&stock
    • 605 Words
    • 3 Pages

    corporate finance_bond&stock

    1. You have a cash obligation of $132,240 to be made at the end of year 5. Show how you can use coupon bonds with a coupon rate of 8%, a face value of $1,000, a maturity date at the end of year 6, and a yield to maturity of 8% to ensure that you can meet your cash obligation at the end of year 5. Suppose that you purchase the bonds at the beginning of year 1 and that the market interest rate changes only once right after you have purchased the bonds. There are three possible interest rates, 7.9%, 8%, and 8.1%, each of which occurs with probability 1/3.…

    • 605 Words
    • 3 Pages
    Satisfactory Essays
    Read More

Related Topics