A Best Industries bond has a 10 % coupon rate and a $1,000 face value. Interest

Question

A Best Industries bond has a 10 % coupon rate and a $1,000 face value. Interest is paid semiannually. The bond matures in 19 years. What is the bonds value if investors require a 11 % yield? A Tasrohard Corp. bond has an 7.5% coupon, paid every six months. $1,000 is the par value for the bond, the bond matures in six years. If the bond currently sells for $921.37, what is its yield to maturity? Selco Company bonds arc selling in the market for $1, 100. Bonds will mature in 14 years. It pays $70 annual interest. If the bonds are purchased at the market price, what is the (a) coupon rate, (b) current yield, (c) approximate yield to maturity and (d) capital gains yield?

Explanation / Answer

Answer: Question-1:

Bond value is the present value of it's future cash flow:

Using a financial calculator:

PMT = $1,000*10%*(1/2) = $50

FV = $1,000

N = 19 years*2 = 38

I/Y = 11%/2 = 5.5%

CPT = PV = 920.97 (ans)

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