I need help double checking my homework please help if you can. This is all one

Question

I need help double checking my homework please help if you can. This is all one problem, there are multiple parts to the problem but this is one problem please help if you can.

Ashes Divide Corp. has bonds on the marker with 14.5 years to maturity, a YTM of 6.8%, and a current price of $924. The bonds make semiannual payments. What must the coupon rate be on these bonds?

Part 2:
They also have 9% coupon bonds on the market with 9 years left to maturity. The bonds make annual payments. If the bond currently sells for $934, what is its YTM?

Part 3:
They also issued 11-year bonds a year ago at a coupon rate of 6.9%. The bonds make semiannual payments. If the YTM on these bonds is 7.4%, what is the current bond price?

Explanation / Answer

Part-1: Computing the coupon rate on these bonds using excel sheet: According to the given information, Par value of the bond = $1,000 Current price of the bond = $924 Years to maturity = 14.5 YTM = 6.8% Since the bond makes semi-annual payments, the Years becomes semi-annual periods Periods to maturity = 14.5 yrs * 2                                   = 29 periods Semi-annual YTM = 6.8% / 2                                 = 3.4% The coupon rate is calculated as Annual coupon payment = Face value of the bond * Coupon rate To find the coupon rate, we have to calculate the coupon payment value. CAlculating the semi-annual payment value using excel sheet: Step1: Go to excel and click "Insert" to insert the function. Step2: Select the "PMT" function as we are finding the semi-annual payment in this case. Step3: Enter the values as Rate = 3.4%; Nper = 29; PV = 924; FV = -1000 Step4: Click "OK" to get the desired value. The value comes to "$29.84" Since the payment is a cash outflow, it will result in negative value. Hence the semi-annual payment value is $30 Annual payment is $60 ($30 * 2) Coupon rate = Anual coupon payment / FAce value of the bond                      = $60 / $1000                      = 0.06 or 6% Therefore, the annual coupon rate is 6% Part-2: CAlculating the YTM of the bond using excel sheet: According to the given information, Par value of the bond = $1,000 Current price of the bond = $934 Years to maturity = 9 Coupon rate = 9% YTM = ? Annual coupon payment = Face value of the bond * Coupon rate                                           = $1,000 * 0.09                                           = $90 Step1: Go to excel and click "Insert" to insert the function. Step2: Select the "Rate" function as we are finding the annual yield in this case. Step3: Enter the values as  Nper = 9; PMT = -90; PV = 934; FV = -1000 Step4: Click "OK" to get the desired value The value comes to "10.15%" Therefore, the Annual YTM of the bond is 10.15% Part-3: CAlculating the current price of the bond using excel sheet: According to the given information, Par value of the bond = $1,000 Current price of the bond = ? Years to maturity = 11 Coupon rate = 6.9% YTM = 7.4% Since the bond makes semi-annual payments, the Years becomes semi-annual periods Periods to maturity = 11 yrs * 2                                   = 22 periods Semi-annual YTM = 7.4% / 2                                 = 3.7% Annual coupon payment = Face value of the bond * Coupon rate                                           = $1,000 * 0.069                                           = $69 Semi-annual coupon payment = $69 / 2                                                    = $34.5 Step1: Go to excel and click "Insert" to insert the function. Step2: Select the "PV" function as we are finding the current price of the bond in this case. Step3: Enter the values as  Rate = 3.7%; Nper = 22; PMT = -34.5; FV = -1000 Step4: Click "OK" to get the desired value The value comes to "$962.81" Therefore, the Current price of the bond is $962.81 According to the given information, Par value of the bond = $1,000 Current price of the bond = $934 Years to maturity = 9 Coupon rate = 9% YTM = ? Annual coupon payment = Face value of the bond * Coupon rate                                           = $1,000 * 0.09                                           = $90 Step1: Go to excel and click "Insert" to insert the function. Step2: Select the "Rate" function as we are finding the annual yield in this case. Step3: Enter the values as  Nper = 9; PMT = -90; PV = 934; FV = -1000 Step4: Click "OK" to get the desired value The value comes to "10.15%" Therefore, the Annual YTM of the bond is 10.15% Part-3: CAlculating the current price of the bond using excel sheet: According to the given information, Par value of the bond = $1,000 Current price of the bond = ? Years to maturity = 11 Coupon rate = 6.9% YTM = 7.4% Since the bond makes semi-annual payments, the Years becomes semi-annual periods Periods to maturity = 11 yrs * 2                                   = 22 periods Semi-annual YTM = 7.4% / 2                                 = 3.7% Annual coupon payment = Face value of the bond * Coupon rate                                           = $1,000 * 0.069                                           = $69 Semi-annual coupon payment = $69 / 2                                                    = $34.5 Step1: Go to excel and click "Insert" to insert the function. Step2: Select the "PV" function as we are finding the current price of the bond in this case. Step3: Enter the values as  Rate = 3.7%; Nper = 22; PMT = -34.5; FV = -1000 Step4: Click "OK" to get the desired value The value comes to "$962.81" Therefore, the Current price of the bond is $962.81                                           = $1,000 * 0.09                                           = $90 Step1: Go to excel and click "Insert" to insert the function. Step2: Select the "Rate" function as we are finding the annual yield in this case. Step3: Enter the values as  Nper = 9; PMT = -90; PV = 934; FV = -1000 Step4: Click "OK" to get the desired value The value comes to "10.15%" Therefore, the Annual YTM of the bond is 10.15% Part-3: CAlculating the current price of the bond using excel sheet: According to the given information, Par value of the bond = $1,000 Current price of the bond = ? Years to maturity = 11 Coupon rate = 6.9% YTM = 7.4% Since the bond makes semi-annual payments, the Years becomes semi-annual periods Periods to maturity = 11 yrs * 2                                   = 22 periods Semi-annual YTM = 7.4% / 2                                 = 3.7% Annual coupon payment = Face value of the bond * Coupon rate                                           = $1,000 * 0.069                                           = $69 Semi-annual coupon payment = $69 / 2                                                    = $34.5 Step1: Go to excel and click "Insert" to insert the function. Step2: Select the "PV" function as we are finding the current price of the bond in this case. Step3: Enter the values as  Rate = 3.7%; Nper = 22; PMT = -34.5; FV = -1000 Step4: Click "OK" to get the desired value The value comes to "$962.81" Therefore, the Current price of the bond is $962.81 Step2: Select the "Rate" function as we are finding the annual yield in this case. Step3: Enter the values as  Nper = 9; PMT = -90; PV = 934; FV = -1000 Step4: Click "OK" to get the desired value The value comes to "10.15%" Therefore, the Annual YTM of the bond is 10.15% Part-3: CAlculating the current price of the bond using excel sheet: According to the given information, Par value of the bond = $1,000 Current price of the bond = ? Years to maturity = 11 Coupon rate = 6.9% YTM = 7.4% Since the bond makes semi-annual payments, the Years becomes semi-annual periods Periods to maturity = 11 yrs * 2                                   = 22 periods Semi-annual YTM = 7.4% / 2                                 = 3.7% Annual coupon payment = Face value of the bond * Coupon rate                                           = $1,000 * 0.069                                           = $69 Semi-annual coupon payment = $69 / 2                                                    = $34.5 Step1: Go to excel and click "Insert" to insert the function. Step2: Select the "PV" function as we are finding the current price of the bond in this case. Step3: Enter the values as  Rate = 3.7%; Nper = 22; PMT = -34.5; FV = -1000 Step4: Click "OK" to get the desired value The value comes to "$962.81" Therefore, the Current price of the bond is $962.81 According to the given information, Par value of the bond = $1,000 Current price of the bond = ? Years to maturity = 11 Coupon rate = 6.9% YTM = 7.4% Since the bond makes semi-annual payments, the Years becomes semi-annual periods Periods to maturity = 11 yrs * 2                                   = 22 periods Semi-annual YTM = 7.4% / 2                                 = 3.7% Annual coupon payment = Face value of the bond * Coupon rate                                           = $1,000 * 0.069                                           = $69 Semi-annual coupon payment = $69 / 2                                                    = $34.5 Step1: Go to excel and click "Insert" to insert the function. Step2: Select the "PV" function as we are finding the current price of the bond in this case. Step3: Enter the values as  Rate = 3.7%; Nper = 22; PMT = -34.5; FV = -1000 Step4: Click "OK" to get the desired value The value comes to "$962.81" Therefore, the Current price of the bond is $962.81 Since the bond makes semi-annual payments, the Years becomes semi-annual periods Periods to maturity = 11 yrs * 2                                   = 22 periods Semi-annual YTM = 7.4% / 2                                 = 3.7% Annual coupon payment = Face value of the bond * Coupon rate                                           = $1,000 * 0.069                                           = $69 Semi-annual coupon payment = $69 / 2                                                    = $34.5                                           = $1,000 * 0.069                                           = $69 Semi-annual coupon payment = $69 / 2                                                    = $34.5 Step1: Go to excel and click "Insert" to insert the function. Step2: Select the "PV" function as we are finding the current price of the bond in this case. Step3: Enter the values as  Rate = 3.7%; Nper = 22; PMT = -34.5; FV = -1000 Step4: Click "OK" to get the desired value The value comes to "$962.81" Therefore, the Current price of the bond is $962.81 Step2: Select the "PV" function as we are finding the current price of the bond in this case. Step3: Enter the values as  Rate = 3.7%; Nper = 22; PMT = -34.5; FV = -1000 Step4: Click "OK" to get the desired value The value comes to "$962.81" Therefore, the Current price of the bond is $962.81

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