Hi, please kindly help me with these problems below. Thanks 1. Abner Corporation

Question

Hi, please kindly help me with these problems below. Thanks

1. Abner Corporation’s bond mature in 16 years and pay 12 percent interest annually. If you purchase the bonds for $850, what is your yield to maturity? (Round to two decimal places)

2. Fingen’s 19-year, $1,000 par value bonds pay 12 percent interest annually? The market price of the bonds is $1,130 and the market’s required yield to maturity on a comparable risk bond in 9 percent.

A. Compute the bond’s yield to maturity

B. Determine the value of the bond to you, given your required rate of return.

C. Should you purchase the bond?

(Round answers to two decimal places)

3. The market price is $775 for a 15-year bond ($1,000 par value) that pays 9 percent annual interest, but makes interest payments on a semiannual basis (4.5 percent semiannually) What is the bond’s yield to maturity? (Round to two decimal places)

4. (Floating rate loan) The Bensington Glass Company entered into a loan agreement with the firm's bank to finance the firm's working capital. The loan called for a floating rate that was 25 basis points (0.25 percent) over an index for the based on LIBOR. In addition the loan adjusted weekly based on closing value of the index for the previous week and had a maximum annual rate of 2.24 percent and a minimum of 1.71 percent. Calculate the rate of interest for weeks 2 through 10.

Date

LIBOR

Week 1

1.94%

Week 2

1.68%

Week 3

1.53%

Week 4

1.36%

Week 5

1.65%

Week 6

1.68%

Week 7

1.68%

Week 8

1.88%

Week 9

1.87%

Date

LIBOR

Week 1

1.94%

Week 2

1.68%

Week 3

1.53%

Week 4

1.36%

Week 5

1.65%

Week 6

1.68%

Week 7

1.68%

Week 8

1.88%

Week 9

1.87%

Explanation / Answer

Soluation.

Q1. Calculation of YTM of bond.

Formula = [C + (F-P) / n] / F+P / 2

= [120 + (1,00-850) / 16] / 1,000+850 / 2

= 129.37 / 925

YTM = 13.98%

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