A 20-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040. The bond sells for $1,100. (Assume that the bond has just been issued.)

Basic Input Data:

Years to maturity:

20

Periods per year:

2

Periods to maturity:

40

Coupon rate:

8%

Par value:

$1,000

Periodic payment:

$40.00

Current price

$1,100

Call price:

$1,040

Years till callable:

5

Periods till callable:

10

a. What is the bond's yield to maturity?

Peridodic YTM =

3.53%

Annualized Nominal YTM =

7.06%

b. What is the bond's current yield?

Current yield =

Ann. Coupon /

Price

Current yield =

/

Current yield =

c. What is the bond's capital gain or loss yield?

Cap. Gain/loss yield =

YTM

-

Current yield

Cap. Gain/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.

Peridodic YTC =

Annualized Nominal YTC =

e. How would the price of the bond be affected by changing the going market interest rate? (Hint: Conduct a sensitivity analysis of price to changes in the going market interest rate for the bond. Assume that the bond will be called if and only if the going rate of interest falls below the coupon rate. That is an oversimplification, but assume it anyway for purposes of this problem.)

Nominal market rate, r:

8%

Value of bond if it's not called:

Value of bond if it's called:

f. Now assume the date is 10/25/2018. Assume further that a 12%, 10-year bond was issued on 7/1/2028, pays interest semiannually (January 1 and July 1), and sells for $1,100. Use your spreadsheet to find the bonds yield.

Basic info:

Settlement (today)

Maturity

Coupon rate

Current price (% of par)

Redemption (% of par value)

Frequency (for semiannual)

Basis (360 or 365 day year)

Yield to Maturity:

4 5 | A 20-year, 8% semiannual coupon bond with IS 1,100. (Assume that the bond has just been par value of $1.000 may be called in 5 years ata call price of S1,040. The bond sells for 7 Basic Input Data 8 Years to maturity 9 Perods per year 10 Periods to 11 Coupoe rate 12 |Par value: 13 Periodic payment 14 Current 15 Call price: 16 Years till callable si ,00 18 19a. What is the bond's yield to muturity? 20 21 23 24 25 b. 26 27 28 What is the bond's current yield? Current eldAnn. Coupon Current yield urrent yield 30 31 32 e What is the bond's capital gain or loss yield? 34 Cap. Gal/loss yieldYTM 35 Cap.Galn/loss yield 36 Cap. Cala/loss yield 37 38 39 d. What is the bond's yield to call? 40 41 Here we cun again use the Rate tunctoe but with data related to the call. 42 43 Current yleld Peridodic YIC Anncalized Nominal YTC 45 46 47 48 e. How would the price of the bond be affected by changing the golng market interest rate? (Hint: Conduct a sensitivity analysis of 49 price to changes En the going market interest rate for the bond. Assume that the bond wl be called if and only if the going rate of 50 | interest falls below the coupon rate. .rhat is an oversimplification. but kssume it anyway for purposes of this 51 52 Nominal market rate, r: 53 Value of bond if it's not called 54 Value of bond if it's called 8% 56 5 7 I. Now assume the date is 10/25/2018. Assume further that a 12%, 10-year bond was issued on 7/1/2028, pays interest semiannually 58 (January 1 and Jely I, and sells for S1,100. Use your spreadsheet to find the bond's yield. 59 60 61 Settlement( 62 Maurity 63 Coupoe rate 64 | Current price (% of par 65 Redemptice 0% of par 66 Frequency (for semiannual) 67 | Basis (360 Oe 365 day 68 69 70 Yield to 71