A corporate bond maturing in 15 years with a coupon rate of 8.9 percent was purchased for $940 and it now selling for $970.

1. What is its current yield? Round your answer to one decimal place.

2. What will be its selling price in two years if comparable market interest rates drop 2.9 percentage points? (Hint: Use Appendix A-2 and Appendix A-4 or the Garman/Forgue companion website.) Round Present Value of a Single Amount and Present Value of Series of Equal Amounts in intermediate calculations to four decimal places. Round your answer to the nearest cent.

3. Calculate the bond's YTM using Equation 14.5 or the Garman/Forgue companion website. Round your answer to two decimal places.

Appendix A-2 Present Value of a Single Amount ($1) (Used to compute the Discounted Present Value of Some Known Future Single Lump Sum) n 1 2 3 0 5 6 7 8 9 10 11 12 13 1% 0.9901 0.9803 0.9706 0.9610 0.9515 0.9420 0.9327 0.9235 0.9143 0.9053 0.8963 0.8874 0.8787 2% 0.9804 0.9612 0.9423 0.9238 0.9057 0.8880 0.8706 0.8535 0.8368 0.8203 0.8043 0.7885 0.7730 0.7579 0.7430 0.7284 0.7142 3% 0.9709 0.9426 0.9151 0.8B85 0.8626 0.8375 0.8131 0.7894 0.7664 0.7441 0.7224 0.7014 0.6810 4% 0.9615 0.9246 .8890 0.8548 0.8219 0.7903 0.7599 0.7307 0.7026 0.6756 0.6496 0.6246 0.6006 0.5775 0.5553 0.5339 0.5134 0.4936 0.4746 0.4564 8% 0.9259 0.8573 0.7938 0.7350 0.6806 0.6302 0.5835 0.5403 0.5002 0.4632 0.4 289 0.3971 0.3677 0.3405 0.3152 0.2919 0.6611 13% 14% 0.8850 0.8772 0.7831 0.7695 0.6931 0.6750 0.6133 0.5921 0.54 280.5194 0.4803 0.4556 0.4251 0.3996 0.3762 0.3506 0.3329 0.3075 0.2946 0.2697 0.2607 0.2366 0.2307 0.2076 0.2042 0.1821 0.1807 0.1597 0.1599 0.1401 0.1415 14 15 15% 0.8696 0.7561 0.6575 0.5718 0.4972 0.4323 0.3759 0.3269 0.2843 0.2472 0.2149 0.1869 0.1625 0.1413 0.1229 0.1069 0.8700 0.8613 5% 6% 7% 0.9524 0.94340.9346 0.9070 0.8900 0.8734 0.8638 0.8396 0.8163 0.8227 0.7921 0.7629 0.7835 0.7473 0.7130 0.7462 0.7050 0.6663 0.7107 0.6651 0.6227 0.6768 0.6274 0.5820 0.6446 0.5919 0.5439 0.6139 0.5584 0.5083 0.5847 0.5268 0.4751 0.5568 0.4970 0.4440 0.5303 0.4688 0.4150 0.5051 0.4423 0.3878 0.4810 0 .4173 0.3624 0.4581 0.3936 0.3387 0.4363 0.3714 0.3166 0.4155 0.3503 0.2959 0.3957 0.3305 0.2765 0.3769 0.3118 0.2584 0.3589 0.2942 0.2415 0.3418 0.2775 0.2257 0.3256 0.2618 0.2109 0.31010.2470 0.1971 0.2953 0.23300.1842 0.2812 0.2198 0.1722 0.2678 0.2074 0.1609 0.2551 0.1956 0.1504 0.2429 0.1846 0.1406 0.2314 0.1741 0.1314 0.1420 0.0972 0.0668 0.0872 0.0543 0.0339 16 0.8528 9% 10% 0.9174 0.9091 0.8417 0.8264 0.7722 0.7513 0.7084 0.6830 0.64990.6209 0.5963 0.5645 0.54700.5132 0.50190.4665 0.4604 0.4241 0.4224 0.3855 0.3875 0.3505 0.3555 0.3186 0.3262 0.2897 0.2992 0.2633 0.2745 0.2394 0.2519 0.2176 0.2311 0.1978 0.2120 0.1799 0.1945 0.1635 0.1784 0.1486 0.1637 0.1351 0.1502 0.1228 0.1378 0.1117 0.1264 0.1015 0.11600.0923 0.1064 0.0839 0.0976 0.0763 0.0895 0.0693 0.0822 0.0630 0.0754 0.0573 0.0318 0.0221 0.0134 0.0085 0.6419 0.6232 0.6050 11% 12% 0.90090.8929 0.8116 0.7972 0.7312 0.7118 0.6587 0.6355 0.5935 0.5674 0.5346 0.5066 0.4817 0.4523 0.4339 0.4039 0.39090.3606 0.3522 0.3220 0.3173 0.2875 0.2858 0.2567 0.2575 0.2292 0.2320 0.2046 0.2090 0.1827 0.1883 0.1631 0.1696 0.1456 0.1528 0.1300 0.1377 0.1161 0.1240 0.1037 0.1117 0.0926 0.1007 0.0826 0.0907 0.0738 0.0817 0.0659 0.0736 0.0588 0.0663 0.0525 0.0597 0.0469 0.0538 0.0419 0.0485 0.0374 0.0437 0.0334 0.0154 0.0107 0.0054 0.0035 16% 17% 0.8621 0.8547 0.7432 0.7305 0.6407 0.6244 0.5523 0.5337 0.47610.4561 0.4104 0.3898 0.3538 0.3332 0.3050 0.2848 0.2630 0.2434 0.2267 0.2080 0.1954 0.1778 0.1685 0.1520 0.1452 0.1299 0.1252 0.1110 0.1079 0.0949 0.0930 0.0811 0.0802 0.0693 0.0691 0.0592 0.0596 0.0506 0.0514 0.0433 0.0443 0.0370 0.0382 0.0329 0.0270 0.0284 0.0231 0.0245 0.0197 0.0211 0.0169 0.0182 0.0144 0.0157 0.0123 0.0135 0.0105 0.0116 0.0090 0.0026 0.0019 0.0006 0.0004 18% 19% 0.84750.8403 0.7182 0.7062 0.6086 0.5934 0.5158 0.4987 0.4371 0.4190 0.3704 0.3521 0.31390.2959 0.2660 0.2487 0.2255 0.2090 0.1911 0.1756 0.1619 0.1476 0.1372 0.1240 0.1163 0.1042 0.0985 0.0876 0.0835 0.0736 0.0708 0.0618 0.0600 0.0520 0.0508 0.0437 0.0431 0.0367 0.0365 0.0308 0.0309 0.0259 0.0262 0.0218 0.0222 0.0183 0.0188 0.0154 0.0160 0.0129 0.0135 0.0109 0.0115 0.0091 0.0097 0.0077 0.0082 0.0064 0.0070 0.0054 0.0013 0.0010 0.0003 0.0002 20% 0.8333 0.6944 0.5787 0.4823 0.4019 0.3349 0.2791 0.2326 0.1938 0.1615 0.1346 0.1122 0.0935 0.0779 0.0649 0.0541 0.0451 0.0376 0.0313 0.0261 0.0217 0.0181 0.0151 0.0126 0.0105 0.0087 0.0073 0.0061 0.0051 0.0042 0.0007 0.0001 0.2703 0.1078 0.0929 0.7002 0.5874 0.0946 17 18 19 20 0.8444 0.8360 0.8277 08195 0.2502 0.2317 0.5703 0.0829 0.6864 0.6730 0.5537 0 0.0728 21 0.8114 0.4388 0.4220 22 23 24 25 26 27 28 29 30 40 50 0.8034 0.7954 0.7876 0.7798 0.7720 0.7644 0.7568 0.7493 0.7419 0.6717 0.6080 0.6598 0.5375 0.6468 0.52 19 0.6342 0.5067 0.6217 0.4919 0.6095 0.4776 0.5976 0.4637 0.5859 0.4502 0.5744 0.4371 0.5631 0.4243 0.5521 0.4120 0.45290.3066 0.3715 0.2281 0.4057 0.3901 0.3751 0.3607 0.3468 0.3335 0.3207 0.3083 0.2083 0.1407 .2145 0.1987 0.1839 0.1703 0.1577 0.1460 0.1352 0.1252 0.1159 0.1073 0.1073 0.0994 0.0460 0.0213 0.1108 0.0981 0.0868 0.0768 0.0680 0.0601 0.0532 0.0471 0.0417 0.0369 0.0326 0.0289 0.0256 0.0075 0.0022 0.0638 0.0560 0.0491 0.0431 0.0378 0.0331 0.0291 0.0255 0.0224 0.0196 0.0053 0.0014 0.0808 0.0703 0.0611 0.0531 0.0462 0.0402 0.0349 0.0304 0.0264 0.0230 0.0200 0.0174 0.0151 0.0037 0.0009 Appendix A-4 Present Value of a series of Equal Amounts (an Annuity of $1 Received at the End of Each Period) (Used to Compute the Discounted Present Value of a Stream of Income Payments) n 1 2 1% 09901 1.9704 2.9410 3.9020 4.8534 3 4 5 6 5.7955 7 6.7282 8 7.6517 9 8.5660 8.5660 10 9.4713 11 10.3676 12 11.2551 13 12.1337 13.0037 15 13.8651 16 14.7179 17 15.5623 18 16.3983 1917.2260 2018.0456 21 18.8570 22 19.6604 23 20.4558 24 21.2434 25 22.0232 26 22.7952 27 23.5596 28 24.3 164 29 25.0658 30 25.8077 40 32.8347 50 39.1961 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 09804 0.9709 09615 0.9524 0.9434 0.9346 09259 0.9174 0.9091 0.900908929 0.8850 0.8772 0.8696 0.8621 0.8547 0.8475 0.8403 0.8333 1.9416 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833 1.7591 1.7355 1.7125 1.6901 1.6681 1.6467 1.6257 1.6052 1.5852 1.5656 1.5465 1.5278 2.8839 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.5313 2.4869 2.4437 2.4018 2.3612 2.3216 2.2832 2.2459 2.2096 2.1743 2.1399 2.1065 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699 3.1024 3.0373 2.9745 2.9137 2.8550 2.7982 2.7432 2.6901 2.6386 2.5887 4.71354.5797 4.4518 4.3295 4.2124 4.1002 3.9927 3.8897 3.7908 3.6959 3.60483.5172 3.4331 3.3522 3.2743 3.1993 3.1272 3.0576 2.9906 5.6014 541725.2421 5.0757 4.9173 4.7665 4.62294.48594.3553 4.2305 4.1114 3.9975 3.8887 3.7845 3.6847 3.5892 3.4976 3.4098 3.3255 6.4720 6.23036 .0021 5.7864 55824 53893 5.2064 5.0330 4.8684 4.7122 4.5638 4.4226 4.2883 4.1604 4.0386 3.9224 3.8115 3.7057 3.6046 7.3255 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466 5.5348 5.33495.1461 4.96764.7988 4.6389 4.4873 43436 4.2072 4.0776 3.9544 3.8372 8.1622 7.7861 7.4353 7.1078 6.8017 65152 6.2469 5.9952 5.7590 5.5370 5.3282 5.1317 49464 4.7716 4.6065 4.4506 4.3030 4.1633 4.0310 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 6.1446 5.8892 5.6502 5.4262 5.2161 5.0188 4.83324.6586 4.4941 4.3389 4.1925 9.7868 9.2526 8.7605 8.3064 7.8869 7.4987 7.1390 6.8052 6.4951 6.2065 5.9377 56869 5.4527 5.2337 5.0286 4.8364 4.6561 4.4865 4.3271 10.5753 9.95409.3851 88633 8.3838 7.9427 7.5361 7.1607 6.8137 6.4924 6.1944 59176 5.6603 54206 5.1971 4.9884 4.7932 4.6105 4.4392 113484 10.6350 9.9856 93936 8.8527 8.3577 7.9038 7.4869 7.1034 6.7499 6.4235 6.1218 5.8424 5.5831 5.3423 5.11834.9095 4.7147 4.5327 12.106211.2961 10.5631 9.89869.2950 8.74558.2442 7.78627.3667 69819 6.6282 630256.0021 5.7245 5.4625 5.2293 5.00814.8023 4.6106 12.8493 11.9379 11.1184 10.37979.7122 9.10798.5595 8.0607 7.6061 7.1909 6.8109 6.4624 6.1422 5.84745.57555.32425.0916 4.87594.6755 13.5777 12.5611 11.6523 10.8378 10.10599.4466 8.8514 8.31267.8237 7.3792 6.9740 6.6039 6.2651 5.9542 5.6685 5.40535.1624 4.9377 4.7296 14.2919 13.1661 12.1657 11.2741 10.4773 9.7632 9.1216 85436 80216 7.5488 7.1196 6.7291 6.37296.04725.7487 54746 52223 4.9897 4.7746 14.9920 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719 8.7556 8.2014 7.7016 7.2497 6.8399 6.4674 6.1280 5.8178 5.5339 5.27325.0333 4.8122 15.6785 14.3238 13.1339 12.0853 11.1581 10.3356 9.6036 8.9501 8.3649 7.83937.3658 6.9380 6.5504 6.1982 5.8775 5.5845 5.3162 5.0700 4.8435 163514 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 9.1285 8513679633 7.4694 7.0248 6.6231 6.25935.9288 5.6278 5.3527 5.1009 4.8696 17.0112 15.4150 14.0292 12.8212 11.7641 10.8355 10.0168 9.2922 8.6487 8.0751 7.5620 7.1016 .6870 6.3125 5.9731 5.6648 5.3837 5.1268 4.8913 17.6580 15.9369 14.4511 13.1630 12.0416 11.0612 10.2007 9.4424 8.7715 8.1757 7.6446 7.1695 6.7429 6.3587 6.0113 5.6964 5.4099 5.1486 4.9094 18.2922 16,4436 14.8568 13.4886 123034 11.2722 10.3711 9.5802 8.8832 8.2664 7.7184 7.2297 6.7921 6.3988 6.0442 5.7234 5.4321 5.1668 49245 18.9139 16.9355 15.2470 13.7986 12.5504 11.4693 10.5288 9.7066 89847 8.3481 7.7843 7.2829 6.8351 6.4338 6.0726 5.7465 5.45095.1822 4.9371 19.5235 17.4131 15.6221 14.0939 12.7834 116536 10.6748 9.8226 9.0770 8.4217 7.8431 7.3300 6.8729 6.4641 6.0971 5.7662 54669 5.1951 49476 20.1210 17.8768 15.982814.3752 13.0032 11.8258 10.8100 9.9290 9.16098 .4881 7.8957 7.3717 6.9061 6.4906 6.1182 5.7831 5.4804 5.2060 4.9563 20.7069 18.3270 16.3296 14.6430 13.2105 11.9867 10.9352 10.0266 9.2372 8.5478 7.9426 7.4086 6.9352 6.5135 6.1364 5.7975 5.49195.2151 4.9636 21.2813 18.7641 16.6631 14.8981 13.4062 12.1371 11.0511 10.1161 9.3066 8.6016 7.9844 7.4412 6.9607 6.5335 6.1520 5.8099550165.2228 4.9697 21.8444 19.1885 16.9837 15.1411 13.5907 12.2777 11.1584 10.1983 9.3696 8.6501 8.0218 7.4701 6.9830 6.5509 6.1656 5.8204 5.5098 5.2292 4.9747 22.3965 19.6004 17.2920 153725 13.7648 12.4090 11.2578 10.2737 9.426986938 8.0552 7.4957 7.0027 6.5660 6.1772 5.8294 5.5168 5.2347 4.9789 27.3555 23.1148 19.7928 17.1591 15.0463 13.3317 11.9246 10.7574 9.7791 89511 82438 7.6344 7.1050 31.4236 25.7298 21.4822 18.2559 15.7619 13.8007 12.2335 10.9617 9.9148 9.0417 83045 76752 7.1327 6.6605 6.2463 5.8801 5.5541 5.26234.9995 YTM - I+[(FV - CV)/NI (14.5) (FV + CV)/2 where I = Interest paid annually in dollars FV = Face value CV = current value (price) N = Number of years until maturity