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Bond's Yield to Maturity

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Bond's Yield to Maturity
| | | | | | |2008/3/8 | | | | | | | | | | | | | | | | | | | | | | | | | | | |Chapter 4. Ch04 P24 Build a Model | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |Rework Problem 4-12 using a spreadsheet. After completing questions a through d, answer the new question. A 10-year 12 percent semiannual coupon bond, with a par value of $1,000, may be called in 4 years at a call price of $1,060. The bond sells for $1,100. (Assume that the bond has just been issued.) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |Work parts a through d with a spreadsheet. You can also work these parts with a calculator to check your spreadsheet answers if you aren't confidient of your spreadsheet solution. You must then go on to work the remaining parts with the spreadsheet. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |a. What is the bond's yield to maturity? | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |Basic Input Data: | | | | | | | | | | | | | | | | |Years to maturity: |10 | | | | | | | | | | | | | | | |Periods per year: |2 | | | | | | | | | | | | | | | |Periods to maturity: |20 | | | | | | | | | | | | | | | |Coupon rate: |12% | | | | | | | | | | | | | | | |Par value: | |$1,000 | | | | | | | | | | | | | | | |Periodic payment: |$60 | | | | | | | | | | | | | | | |Current price |$1,100 | | | | | | | | | | | | | | | |Call price: | |$1,060 | | | | | | | | | | | | | | | |Years till callable: |4 | | | | | | | | | | | | | | | |Periods till callable: |8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |YTM = |5.18% | |This is a nominal rate, not the effective rate. Nominal rates are generally | | | | | | | | | | | | |quoted. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |b. What is the bond's current yield? | | | | | | | | | | | | | | | | | | | | | |
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