Question
Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bonds. His financial planner has suggested the following
Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bonds. His financial planner has suggested the following bonds:
Bond A has a 10% annual coupon, matures in 12 years, and has a $1,000 face value.
Bond B has a 6% annual coupon, matures in 12 years, and has a $1,000 face value.
Bond C has an 8% annual coupon, matures in 12 years, and has a $1,000 face value.
Each bond has a yield to maturity of 8%.
The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. Use a minus sign to enter negative values, if any. If an answer is zero, enter "0".
Calculate the price of each of the three bonds. Round your answers to the nearest cent.
Price (Bond A): $ fill in the blank 8
Price (Bond B): $ fill in the blank 9
Price (Bond C): $ fill in the blank 10
Calculate the current yield for each of the three bonds. (Hint: The expected current yield is calculated as the annual interest divided by the price of the bond.) Round your answers to two decimal places.
Current yield (Bond A): fill in the blank 11 %
Current yield (Bond B): fill in the blank 12 %
Current yield (Bond C): fill in the blank 13
If the yield to maturity for each bond remains at 8%, what will be the price of each bond 1 year from now? Round your answers to the nearest cent.
Price (Bond A): $
Price (Bond B): $
Price (Bond C): $
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