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Bond Valuation Assume that a 10-year, 2.5% annual coupon bond with semiannual (two periods per year) payments has a par value of $1,000. Assume the
Bond Valuation Assume that a 10-year, 2.5% annual coupon bond with semiannual (two periods per year) payments has a par value of $1,000. Assume the bond can be called at the five-year mark (i.e., in 5 years) at a call price of $1,100. The bond currently sells for $950. Employ the Excel file to answer the following questions: Part 1: Bond Yield A) Fill in and calculate the basic bond data. Note that the periods to maturity is equal to the years to maturity times the periods per year, the periods until callable is equal to years until callable times the periods per year; the periodic coupon payment is equal to the annual coupon payment divided by the periods per year. (7 points) B) Using the Excel Rate function, calculate the periodic Yield to Maturity. Using the Excel Rate function, calculate the annualized Yield to Maturity. (7 points) C) Calculate the current yield. The current yield is defined as the Annual Coupon payment divided by Current Price (7 Point) D) Calculate the Capital Gain or Loss Yield. Capital Gain or Loss Yield - Annualized YTM - Current Yield. (7 points) E) Using the Excel Rate function, calculate the periodic Yield to Call. Using the Excel Rate function, calculate the annualized Yield to Call. (7 points)
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