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 Keedsler Co.’s bonds. Company Coupon Maturity Last Price Last Yield EST Spread UST (Years) EST Volume (1000s) Vandelay Inc. 8.25% 01-01-2026 $97.87 8.57% 2.37% 10 59,725 Swing Inc. 5.80% 01-01-2021 $99.22 5.98% 0.58% 5 52,930 ABC Inc. 8.98% 01-01-2026 $104.07 8.37% 2.17% 10 46,932 Worth Inc. 9.63% 01-01-2046 $88.14 10.98% 4.03% 30 45,120 Keedsler 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 ? Which bond is trading at a premium? a. Vandelay Inc. b. Swing Inc. c. ABC Inc.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter11: Notes, Bonds, And Leases

Section: Chapter Questions

Problem 31P

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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 Keedsler Co.’s bonds.

Company	Coupon	Maturity	Last Price	Last Yield	EST Spread	UST (Years)	EST Volume (1000s)
Vandelay Inc.	8.25%	01-01-2026	$97.87	8.57%	2.37%	10	59,725
Swing Inc.	5.80%	01-01-2021	$99.22	5.98%	0.58%	5	52,930
ABC Inc.	8.98%	01-01-2026	$104.07	8.37%	2.17%	10	46,932
Worth Inc.	9.63%	01-01-2046	$88.14	10.98%	4.03%	30	45,120
Keedsler 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 ______?

Which bond is trading at a premium?

a. Vandelay Inc.

b. Swing Inc.

c. ABC Inc.

d. Worth Inc.

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