Question
A 25-year, 6% semiannual coupon bond with a par value of $1,000 may be called in 8 years at a call price of $1,020. The
A 25-year, 6% semiannual coupon bond with a par value of $1,000 may be called in 8 years at a call price of $1,020. The bond sells for $1,190. (Assume that the bond has just been issued.)
What is the bond's yield to maturity? Round your answer to two decimal places.
What is the bond's current yield? Round your answer to two decimal places.
What is the bond's capital gain or loss yield? Round your answer to two decimal places. Use a minus sign to enter a negative value, if any.
What is the bond's yield to call? Round your answer to two decimal places.
How would the price of the bond be affected by a change in the going market interest rate?Round your answers to the nearest cent.
Nominal market rate | Actual bond price | |
0 | % | |
2 | % | |
4 | % | |
6 | % | |
8 | % | |
10 | % | |
12 | % | |
14 | % | |
16 | % |
Now assume the date is October 25, 2020. Assume further that an 11%, 15-year bond was issued on July 1, 2020, pays interest semiannually (on January 1 and July 1), and sells for $1,190. Again, it may be called in 8 years from the date of issue at a call price of $1,020. Use your spreadsheet to find the bond's yield. Round your answers to two decimal places.
Yield to maturity: | |
Yield to call: |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started