Question
Help please! I am in dire need of help when it comes to bond pricing. I really have no idea where to even begin or
Help please! I am in dire need of help when it comes to bond pricing. I really have no idea where to even begin or how to break down the problem. I'd love to see a breakdown of each part if possible. Thank you in advance!
Use this protocol for your answers to a-f:
Use a $ for all of these dollar values.
Use a comma for all dollar values in excess of $999.
Round off all values to two decimal places.
For parts a-c, consider a Weyland Corp. bond that has a face value (FV) of $1000, will mature in eight years, and has an annual coupon of $68.The market rate of interest is 5.9%.
For parts d-g, consider a Yutani Corp. bond with FV=$1000, maturity = 2024 (March), C=$61 and i=7.25%.
a.What is the current market price of the Weyland bond?
b.Suppose that the current market interest rate rises to 7.1%.What will be the new market price for the Weyland bond?
c.Suppose that two years go by and there are now (in 2023) only six years left until the Weyland bond matures.If the market rate of interest is 5.9%, what will be the Weyland bond's price in that year?
d.What is the current price of the Yutani bond?
e.What is the present value of just the one coupon that will be redeemed at the maturity of the Yutani bond (in March 2024) three years from now?
f.If the Fed jumps into the bond market, even though it just buys U.S. Treasuries, it will affect all interest rates to some extent.If they sell lots of bonds and interest rates rise to 7.8%, what will be the new price of the Yutani bond?
g.Suppose that you own the Yutani bond.Given what happened in part f, how do you feel?Either "happy" or "sad"
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