A 10-year maturity bond with par value $1,000 makes semiannual coupon payments a

Question

A 10-year maturity bond with par value $1,000 makes semiannual coupon payments at a coupon rate of 5%.

a. Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is $950. (Round your intermediate calculations to 4 decimal places. Round your answers to 2 decimal places.)
Bond equivalent yield to maturity % _______________
Effective annual yield to maturity % _______________

b. Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is $1,000. (Do not round intermediate calculations.Round your answers to 2 decimal places.) Bond equivalent yield to maturity % _______________
Effective annual yield to maturity % _______________

c. Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is $1,050. (Round your intermediate calculations to 4 decimal places. Round your answers to 2 decimal places.)
Bond equivalent yield to maturity % _______________
Effective annual yield to maturity % _______________

Explanation / Answer

Ans a) Coupon rate=(5%/2) 2.5% Years to maturity=(10*2)=nper 20 Years Future value=FV $1,000 Present Value=PV -950 Coupon Payment=PMT $25 Number of payments 2 RATE(nper,Pmt,PV,FV,Type) RATE(20,25,-950,1000,0) 2.831% Equivalent Yield to Maturity=(2.831%*2) 5.66 % Effective Yield to maturity=(1+.02831)^2-1 5.74% Ans b) Coupon rate=(5%/2) 2.5% Years to maturity=(10*2)=nper 20 Years Future value=FV $1,000 Present Value=PV -1000 Coupon Payment=PMT $25 Number of payments 2 RATE(nper,Pmt,PV,FV,Type) RATE(20,25,-1000,1000,0) 2.500% Equivalent Yield to Maturity=(2.50%*2) 5.00 % Effective Yield to maturity=(1+.025)^2-1 5.06% Ans c ) Coupon rate=(5%/2) 2.5% Years to maturity=(10*2)=nper 20 Years Future value=FV $1,000 Present Value=PV -1050 Coupon Payment=PMT $25 Number of payments 2 RATE(nper,Pmt,PV,FV,Type) RATE(20,25,-1050,1000,0) 2.189% Equivalent Yield to Maturity=(2.189%*2) 4.38 % Effective Yield to maturity=(1+.0438)^2-1 8.99%

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