Bond Valuation

Years to maturity $20$

Number of coupon payment per year $2$

Coupon rate $9\%$

Par value $$1,000$

Current price $$1,130$

Call price $$1,080$

Years until bond is callable $6$

a$.$ Calculating the bond's yield to maturity Formulas

Periodic YTM $3\mathrm{.}8571\%=$RATE$($C$3*$C$4,45,-$C$7,$C$6)$

Annualized nominal YTM $7\mathrm{.}71\%=$C$12*$C$4$

b$.$ Calculating the bond's current yield

Current yield $7\mathrm{.}96\%=($C$6*$C$5)/$C$7$

c$.$ Calculating the bond's capital gain or loss yield

Capital gain$/$loss yield $-0\mathrm{.}25\%=$C$13-$C$16$

d$.$ Calculating the bond's yield to call

Periodic YTC $3\mathrm{.}6824\%=$RATE$($C$9*$C$4,$C$6*$C$5/$C$4,-$C$7,$C$8)$

Annualized nominal YTC $7\mathrm{.}36\%=$C$22*2$

e$.$ Assume that the bond will be called if and only if the going rate of interest falls below the coupon rate.

Conducting a sensitivity analysis of price to changes in the going market interest rate for the bond

Nominal market rate $9\%$

Bond price if it's not called #N$/$A

Bond price if it's called #N$/$A

Formulas

Bond price if "Actual

bond price" "Nominal

market rate" Bond price if "Actual

bond price"

Not called Called Not called Called

$($C$27)$ $$0\mathrm{.}00$ $$0\mathrm{.}00($C$27)$ $$0\mathrm{.}00$ $$0\mathrm{.}00$

$0\%0\%$ #N$/$A #N$/$A #N$/$A

$2\%2\%$ #N$/$A #N$/$A #N$/$A

$4\%4\%$ #N$/$A #N$/$A #N$/$A

$6\%6\%$ #N$/$A #N$/$A #N$/$A

$8\%8\%$ #N$/$A #N$/$A #N$/$A

$10\%10\%$ #N$/$A #N$/$A #N$/$A

$12\%12\%$ #N$/$A #N$/$A #N$/$A

$14\%14\%$ #N$/$A #N$/$A #N$/$A

$16\%16\%$ #N$/$A #N$/$A #N$/$A

f$.$ Calculating the bond's yield

Settlement date $($today$)10/25/2020$

Maturity date $7/1/2035$

Call date $7/1/2026$

Coupon rate $11\%$

Par value $(\%$ of par value$)100$

Current price $(\%$ of par value$)113$

Call price $(\%$ of par value$)108$

Frequency $($semiannual bonds$)2$

Basis $(360-$ or $365-$day year$)1$

Yield to maturity #N$/$A

Yield to call #N$/$A