1. A bond is available for purchase at a current market price of $863.73. The co
ID: 2644120 • Letter: 1
Question
1. A bond is available for purchase at a current market price of $863.73. The coupon rate is 8% payable annually; the yield to maturity is 10%. If the par value is $1,000, how many interest payments remain until maturity? (Be sure to indicate your inputs to the financial calculator)
N I/YR PV PMT FV
2. Your broker has callable bonds available for sale.These bonds may be called in five years at a price of $1,060. The coupon rate is 6.5% and interest is paid annually. The bond currently sells for $1,090.What is its yield to call?
N I/YR PV PMT FV
Yield to Call=
Explanation / Answer
1) Using excel function:
=NPER(0.1,80,-863.73,1000)
= 12
Interest payments remain until maturity = 12
2) Using excel function:
=RATE(5,65,-1090,1060)
= 5.47%
Yield to Call= 5.47%
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