Question 18 5 pts Arco Industries has a bond outstanding with 15 years to maturi

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Question 18 5 pts Arco Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semiannual payments and a $1,000 par value. The bond has a 8.10% yield to maturity, but it can be called in 6 years at a price of $1,045, what is the bond's yield to call? Hint: Calculate the bond's price based on the YTM, and then use that price to find the YTC. our D Question 19 5 pts Garrett Company's outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal annual yield to maturity is 6.85%. They pay interest semiannually, and sell at a price of $875, what is the bond's nominal coupon interest rate? Your answer should be between 4.25 an 5 pts D Question 20 bonds with a 10% Blackstone Energy annual coupon rate will be sold at their $1,000 par value to raise $3 million. Second, original issue ear maturity and a $1,000 par value, will be sold, but these bonds will have a nominal coupon of only 7.40%, also with annual payments. is planning to issue two types of 25-year, non-callable bonds to raise a total of $6 million. First, 3. discount (OID) bonds, also with a 25-

Explanation / Answer

value of bond = C* ( 1- (1+r/2)^(-n*2))/(r/2) + Face value/(1+r/2)^(2*n)

where C is coupon = $41.25

r is yield to maturity = 8.1%

n is year to maturity = 15

while putting all this value in above equation

value of bond = $1012.89

Yield to call can be find using above formula where r will be yield to call.

yield to call = 7.98

Ans 19) Again we will use the same formula

value of bond = C* ( 1- (1+r/2)^(-n*2))/(r/2) + Face value/(1+r/2)^(2*n)

here we need to find the value of C

where value of bond = $875

face value = $1000

r = 6.85%

n = 25

while putting all these values we will get value of C = 28.99

bond's nominal coupon interest rate = 2*28.99/1000 = 5.80

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