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1. A bond is available for purchase at a current market price of $863.73. The co

ID: 2644120 • Letter: 1

Question

1. A bond is available for purchase at a current market price of $863.73. The coupon rate is 8% payable annually; the yield to maturity is 10%.   If the par value is $1,000, how many interest payments remain until maturity? (Be sure to indicate your inputs to the financial calculator)                                                                                                               

                N                             I/YR                       PV                          PMT                       FV                          

2. Your broker has callable bonds available for sale.These bonds may be called in five years at a price of $1,060. The coupon rate is 6.5% and interest is paid annually. The bond currently sells for $1,090.What is its yield to call?

                N                             I/YR                       PV                          PMT                       FV          

                Yield to Call=                                                                                    

Explanation / Answer

1) Using excel function:

=NPER(0.1,80,-863.73,1000)

= 12

Interest payments remain until maturity = 12

2) Using excel function:

=RATE(5,65,-1090,1060)

= 5.47%

Yield to Call=   5.47%