The following bond list is from the business section of a financial newspaper on January 1, 2016. Assume that each bond shown matures on January 1 in 5, 10, or 30 years. Each bond shown pays a semiannual coupon and the coupon rate is in the column labeled Coupon. The Last Price and Last Yield columns indicate each bond’s price and YTM at the end of trading. EST Spread indicates the bond’s spread above the relevant US Treasury benchmark, expressed as a percentage. UST indicates which US Treasury security maturity is the relevant benchmark for each bond. EST Volume shows the number of bonds traded during the day. Notice also that prices are stated relative to a par value of $100. Assume all bonds have the same default premium. Fill in the value of Powell Co.’s bonds. Company Coupon Maturity Last Price Last Yield EST Spread UST (Years) EST Volume (1000s) Wernham Inc. 8.25% 01-01-2026 $97.87 8.57% 2.37% 10 59,725 Side Corp. 5.80% 01-01-2021 $99.22 5.98% 0.58% 5 52,930 Widget Corp. 8.98% 01-01-2026 $104.07 8.37% 2.17% 10 46,932 Wayne Inc. 9.63% 01-01-2046 $88.14 10.98% 4.03% 30 45,120 Powell Co. 4.13% 01-01-2021 6.26% 0.86% 5 43,960 If you were to calculate the yield on a security with a 10-year US Treasury security, the yield will be equal to (92.86,90.98,89.17,87.46) . Which bond is trading at a premium? Wayne Inc. Side Corp. Wernham Inc. Widget Corp.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 13P

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10. Bond listings and yield spreads

The following bond list is from the business section of a financial newspaper on January 1, 2016. Assume that each bond shown matures on January 1 in 5, 10, or 30 years. Each bond shown pays a semiannual coupon and the coupon rate is in the column labeled Coupon.

The Last Price and Last Yield columns indicate each bond’s price and YTM at the end of trading. EST Spread indicates the bond’s spread above the relevant US Treasury benchmark, expressed as a percentage. UST indicates which US Treasury security maturity is the relevant benchmark for each bond. EST Volume shows the number of bonds traded during the day. Notice also that prices are stated relative to a par value of $100. Assume all bonds have the same default premium.

Fill in the value of Powell Co.’s bonds.

Company	Coupon	Maturity	Last Price	Last Yield	EST Spread	UST (Years)	EST Volume (1000s)
Wernham Inc.	8.25%	01-01-2026	$97.87	8.57%	2.37%	10	59,725
Side Corp.	5.80%	01-01-2021	$99.22	5.98%	0.58%	5	52,930
Widget Corp.	8.98%	01-01-2026	$104.07	8.37%	2.17%	10	46,932
Wayne Inc.	9.63%	01-01-2046	$88.14	10.98%	4.03%	30	45,120
Powell Co.	4.13%	01-01-2021		6.26%	0.86%	5	43,960

If you were to calculate the yield on a security with a 10-year US Treasury security, the yield will be equal to (92.86,90.98,89.17,87.46) .

Which bond is trading at a premium?

Wayne Inc.

Side Corp.

Wernham Inc.

Widget Corp.

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