The cash flow component of bond investments is made up of the annual interest pa

Question

The cash flow component of bond investments is made up of the annual interest payments and the future redemption value or its par value. Just like other time-value-of-money considerations, the bond cash flows are discounted back in order to determine their present value. In comparing bonds to stocks, many investors look at the respective returns. The total returns in the bond market are made up of both current income and capital gains. Bond invest ment analysis should include the determination of the current yield as well as a specific holding period return On January 13, 2016, you gather the following information on three corporate bonds issued by the General Pineapple Corporation (GPC). Remember that corporate bonds are quoted as a percentage of their par value. Assume the par value of each bond to be $1,000. These debentures are quoted in eighths of a point. Create a spreadsheet that will model and answer the following bond investment problems. Bonds GPC 5.3 13 GPC 6.65s 20 GPC 74 22 CurrentYield Volume Close 25 45 37 105'8 103 104%

Explanation / Answer

Part A.

Part B

Part C

1. Current Dividend Yield = Expected Dividend/Current Price*100

= 0.46/26.20*100

= 1.76%

2. Holding Period Return = (Closing Price - Purchase Price + Dividend Received)/Purchase Price *100

= (26.20-25.25+1.38)

= 9.23%

Bonds (Current Yield = Interest Percentage/Bond Price*100) Volume Close GPC 5.3 13 5.005903188 25 105.875000000 GPC 6.65s 20 5.145631068 45 103 GPC 7.4 22 5.059665871 37 104.75

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.