Hope Corporation bonds bearing a coupon rate of 12%, pay coupons semiannually, h
ID: 2654457 • Letter: H
Question
Hope Corporation bonds bearing a coupon rate of 12%, pay coupons semiannually, have 3 years remaining to maturity, and are currently priced at $940 per bond. What is the yield to maturity?
George, Inc. bonds have a face value of $1,000 and a 9% coupon paid semiannually; the bonds mature in 8 years. What current yield would be reported in The Wall Street Journal if the yield to maturity is 7%?
On January 1, 2004, Pearce and Co. will issue new bonds to finance its expansion plans. Currently outstanding 9%, January 1, 2020 Pearce and Co. bonds are selling for $1,141. If interest is paid semiannually for both bonds, what must the coupon rate of the new bonds be in order for the issue to sell at par?
Explanation / Answer
Solution:
Yield to Maturity = ( Coupon Payment + ( Face Value - Market price / 2) ) / ( Face Value + Market Price / 2 )
= ( 60 + ( (1,000 - 940) / 6) / ( (1,000+940)/2 )
= 7.22 %
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