A B D F G H 1 J K L 5 6 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. 7 The bond sells for $1,100. (Assume that the bond has just been issued.) 8 9 Basic Input Data: 10 Years to maturity: 20 11 Periods per year: 2 12 Periods to maturity: 13 Coupon rate: 8% 14 Par value: $1,000 15 Periodic payment: 16 Current price $1,100 17 Call price: $1,040 18 Years till callable: 5 19 Periods till callable: 20 21 a. What is the bond's yield to maturity? 22 23 Peridodic YTM = 24 Annualized Nominal YTM = Hint: This is a nominal rate, not the effective rate. Nominal rates are generally quoted. 25 26 27 b. What is the bond's current yield? 28 29 Current yield = Hint: Write formula in words. 30 Current yield = 1 Hint: Cell formulas should refer to Input Section 31 Current yield = (Answer) 32 33 34 c. What is the bond's capital gain or loss yield? 35 36 Cap. Gain/loss yield = Hint: Write formula in words. 37 Cap. Gain/loss yield = Hint: Cell formulas should refer to Input Section 38 Cap. Gain/loss yield = (Answer) 39 40 Note that this is an economic loss, not a loss for tax purposes. 41 42 d. What is the bond's yield to call? 43 44 Here we can again use the Rate function, but with data related to the call. 45 46 Peridodic YTC = 47 Annualized Nominal YTC = This is a nominal rate, not the effective rate. Nominal rates are generally quoted. 48 A B D F G H 1 J K L 5 6 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. 7 The bond sells for $1,100. (Assume that the bond has just been issued.) 8 9 Basic Input Data: 10 Years to maturity: 20 11 Periods per year: 2 12 Periods to maturity: 13 Coupon rate: 8% 14 Par value: $1,000 15 Periodic payment: 16 Current price $1,100 17 Call price: $1,040 18 Years till callable: 5 19 Periods till callable: 20 21 a. What is the bond's yield to maturity? 22 23 Peridodic YTM = 24 Annualized Nominal YTM = Hint: This is a nominal rate, not the effective rate. Nominal rates are generally quoted. 25 26 27 b. What is the bond's current yield? 28 29 Current yield = Hint: Write formula in words. 30 Current yield = 1 Hint: Cell formulas should refer to Input Section 31 Current yield = (Answer) 32 33 34 c. What is the bond's capital gain or loss yield? 35 36 Cap. Gain/loss yield = Hint: Write formula in words. 37 Cap. Gain/loss yield = Hint: Cell formulas should refer to Input Section 38 Cap. Gain/loss yield = (Answer) 39 40 Note that this is an economic loss, not a loss for tax purposes. 41 42 d. What is the bond's yield to call? 43 44 Here we can again use the Rate function, but with data related to the call. 45 46 Peridodic YTC = 47 Annualized Nominal YTC = This is a nominal rate, not the effective rate. Nominal rates are generally quoted. 48
