Consider the following bond quotes for ABC and XYZ Corp. It is June 27, 2015. Yo
ID: 2651113 • Letter: C
Question
Consider the following bond quotes for ABC and XYZ Corp. It is June 27, 2015. You must provide equations for each of the questions.
Issuer Name
Coupon
Maturity
Last
Change
Yield%
ABC Corp.
6.375
Jun 2026
95.351
-0.315
?????
XYZ Corp
0.000
Jun 2031
83.458
+0.234
?????
Note that yields for ABC and XYZ Corp bonds are all semiannually compounded.
a.(4 points) Supply the missing information (yield%) for each of the bonds.
b.(4 points) What are the current yield and expected capital gains yield for ABC Corp bond?
c.(2 points) What was the yesterday’s price for ABC Corp bond?
(4 points) What is the implicit interest expense in dollars of year 2020 for XYZ Corp bond? Recall that the bond’s yield is compounded semiannually.
Issuer Name
Coupon
Maturity
Last
Change
Yield%
ABC Corp.
6.375
Jun 2026
95.351
-0.315
?????
XYZ Corp
0.000
Jun 2031
83.458
+0.234
?????
Explanation / Answer
TM= Coupon+FV-BV/n/FV+BV/2 Coupon=100*6.375%/2=3.18
ytm= 3.18+100-95.351/22/100+95.351/2
yIELD=3.47*2=6.95%
xyz= 0+100-83.458/32/100+83.48/2=
ytm=1.127%
Current Yield= Annual Cash Flows/ Market Price
abc=6.675/95.351*100=7% xyz =0
c. Yesterdays price for ABC corporation=95.351-(-.315)= $ 95.666
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