15. Staind plc has 8.5 per cent coupon bonds on the market that have 10 years left to maturity. The bondsmake annual payments. The par value of the bond is E1000. If the YTM on these bonds is 9.75 per cent,what is the current bond price?А.922В.1200C.980D.1000

Calculate the annual coupon amount (PMT) by multiplying the face value of the bond which is £1,000…

Answered: 15. Staind plc has 8,5 per cent coupon…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 8P

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Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?
Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?

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15. Staind plc has 8,5 per cent coupon bonds on the market that have 10 years left to maturity. The bonds make annual payments. The par value of the bond is E1000. If the YTM on these bonds is 9.75 per cent, what is the current bond price? A. 922 B. 1200 C. 980 D. 1000