Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bonds. His financial planner has suggested the following bonds: ● Bond A has a 6% annual coupon, matures in 15years, and has a $1,000 face value. ● Bond B has a 8% annual coupon, matures in 15years, and has a $1,000 face value. ● Bond C has an 10% annual coupon, matures in 15years, and has a $1,000 face value. Each bond has a yield to maturity of 8%. a. Before calculating the prices of the bonds, indicate whether each bond is trading at a premium, at a discount, or at par. b. Calculate the price of each of the three bonds using excel C)how would the price be shown in the wall street journal?
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stuck at this homework. Clifford Clark is a recent retiree who is interested in investing some of
his savings in corporate bonds. His financial planner has suggested the following bonds:
● Bond A has a 6% annual coupon, matures in 15years, and has a $1,000 face value.
● Bond B has a 8% annual coupon, matures in 15years, and has a $1,000 face value.
● Bond C has an 10% annual coupon, matures in 15years, and has a $1,000 face value.
Each bond has a yield to maturity of 8%.
a. Before calculating the prices of the bonds, indicate whether each bond is trading at a
premium, at a discount, or at par.
b. Calculate the price of each of the three bonds using excel
C)how would the price be shown in the wall street journal?
d) calculate the current yield for each of the three bonds
d. If the yield to maturity for each bond remains at 8%, what will be the price of each
bond 1 year from now?
e. Mr. Clark is considering another bond, Bond D. It has an 7% semiannual coupon and
a $1,000 face value. Interest is paid at the enf of each 6months. Bond is schedule to
mature in 9 years and has a price of $1,200. It is also callable in 5 years at a call price
of $1,050.
1. What is the bond’s nominal yield to maturity?
2. What is the bond’s nominal yield to call?
3. If Mr. Clark were to purchase this bond, would he be more likely to receive the
yield to maturity or yield to call? Explain your answer.
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