SPRINT CORP Coupon Rate Maturity Date Callable %7.250 09/15/2021 Yes Last Trade
ID: 2794078 • Letter: S
Question
SPRINT CORP Coupon Rate Maturity Date Callable
%7.250 09/15/2021 Yes
Last Trade Price
106.38
Last Trade Yield
5.373%
Last Trade Date
11/21/2017
Issue Elements
*dollar amount in thousands
Offering Date
10/16/2014
First Coupon Date
03/15/2015
Moody's® Rating
B3 (04/04/2017)
Standard & Poor's Rating
B (02/02/2016)
Original Offering/Outstanding*
$2,250,000.00
Payment Frequency
Semi-Annual
Security Level
Senior
Answer the following questions:
a. What is the price based on a $1000?
b. What is the Semi-Annual Coupon Payment?
c. If you purchase this bond today when will you receive your coupon payment?
d. Calculate the current yield on this bond? What does it mean?
e. Why the CY and YTM are lower than the Coupon rate?
Last Trade Price
106.38
Last Trade Yield
5.373%
Last Trade Date
11/21/2017
Explanation / Answer
(a). Price of bond based on a $1000
6 month interest * PVIFA(Rate/2, life*2) + Maturity value * PVIF(rate/2, life*2)
=$1000*7.250/2*100*(7.250/100*2,7*2) + $1000*PVIF*(7.250/100*2,7*2)
=$1000
(b). Semi annual coupon payment= $1000*7.250/2*100 = $36.25
(c). Coupon payment receive on 15/03/2018.
(d). Current Yield = Annual inflow / Current Price *100
=36.25*2/1063.8*100 = 6.82%
(e). The coupon rate or nominal interest rate of a fixed-income security, such as a bond or note, is the amount of interest paid annually divided by the bond's face value. It is expressed as a percentage. Thus it is the annual interest rate expressed as a percentage of the face value of the bond.
Current yield represents the true interest rate of a fixed-income security, such as a bond or note. It is the amount of interest paid annually divided by the bond's current price. If a bond is trading at a discount to its face value, then the current yield is higher than the coupon rate. If a bond is trading at a premium to its face value, then the current yield is lower than the coupon rate. As the prevailing interest rate fluctuates, bond traders will drive bond prices up or down until the current yield for the bond is equivalent to other securities of similar risk.
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