The following is a list of prices for zero-coupon bonds of various maturities.a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annualcoupon payments. (Do not round intermediate calculations. Round your answers to 2 decimal places.)Maturity (Years)Price of BondYTM1$943.40%2$898.47%$847.62%$792.16%b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments. (Do notround intermediate calculations. Round your answers to the nearest whole percent.)Maturity (years)Price of Bond1$943.40898.47847.62792.16Maturity (Years)Price of BondForward Rate$898.47%3$847.62%4$792.16

Yield To Maturity: It is the rate of return for the bondholders for holding the bond till the…

a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Maturity (Years) Price of Bond YTM 1 $ 943.40 % 2 $ 898.47 % 3 $ 847.62 % $ 792.16 % b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments. (Do not round intermediate calculations. Round your answers to the nearest whole percent.)

a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Maturity (Years) Price of Bond YTM 1 $ 943.40 % 2 $ 898.47 % 3 $ 847.62 % $ 792.16 % b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments. (Do not round intermediate calculations. Round your answers to the nearest whole percent.)

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter5: The Cost Of Money (interest Rates)

Section: Chapter Questions

Problem 17PROB

See similar textbooks

Similar questions

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?
Bond Value as Maturity Approaches An investor has two bonds in his portfolio. Each bond matures in 4 years, has a face value of 1,000, and has a yield to maturity equal to 9.6%. One bond, Bond C, pays an annual coupon of 10%; the other bond, Bond Z, is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years, what will be the price of each of the bonds at the following time periods? Fill in the following table:
Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may be called in 4 years at a call price of 1,060. The bond sells for 1,100. (Assume that the bond has just been issued.) a. What is the bonds yield to maturity? b. What is the bonds current yield? c. What is the bonds capital gain or loss yield? d. What is the bonds yield to call?
Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has a face value of $1,000 and a yield to maturity of 10.5883%. The bond pays coupons semiannually. What is the bond’s current yield?
Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?
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?