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 years. $1,000 is the par value for the bond, the bond matures in 12 months. 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

1)

1 Face value (FV) $                                         1,000 2 Coupon rate 10.00% 3 Number of compounding periods per year 2 4 = 1*2/3 Interest per period (PMT) $                                               50 5 Number of years to maturity 19 6 = 3*5 Number of compounding periods till maturity (NPER) 38 7 Market rate of return/Required rate of return 11.00% 8 = 7/3 Market rate of return/Required rate of return per period (RATE) 5.50% Bonds value PV(RATE,NPER,PMT,FV)*-1 Bonds value $                                       920.98

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