1 Bond Valuation 2 3 4 Years to maturity 5 Number of coupon payment per year 6 Coupon rate 7 Par value Yield to maturity 8 Bond A 12 1 12% $1,000 10% Bond B 12 1 8% $1,000 10% Bond C 12 1 10% $1,000 10% 27 e. Mr. Clark is considering another bond, Bond D. 28 Years to maturity 29 Number of coupon payment per year 30 Coupon rate 31 Par value 32 Coupon payment 33 Current price 34 Call price 35 Years until bond is callable 36 9 2 9% $1,000 $45 $1,150 $1,080 6 50 51 g. Calculating the price of each bond (A, B, and C) at the end of each year until maturity, assuming interest rates remain constant Years Remaining Until Maturity 52 Bond A Bond B Bond C 53 12 54 11 55 10 56 9 57 8 58 59 60 61 62 63 64 65 0 66 67 Creating a graph showing the time path of each bond's value 68 69 70 71 72 73 74 75 76 na 7 6 5 4 3 2 1 92 (1) Calculating the expected current yield for each bond in each year Years Remaining Until Maturity 93 Bond A Bond B 94 12 11 95 10 96 97 9 98 99 7 100 6 101 5 102 4 103 3 104 2 105 1 106 107 (2) Calculating the expected capital gains yield for each bond in each year Years Remaining 108 Until Maturity Bond A Bond B 109 12 110 11 111 10 112 9 113 114 115 116 117 118 119 120 121 89654321 7 Bond C Bond C 122 (3) Calculating the total return for each bond in each year Years Remaining 123 Until Maturity Bond A 124 12 125 11 126 10 127 9 128 8 129 7 130 6 131 132 4 133 134 135 136 137 2 Bond B Bond C