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1) Wilson Wonders\'s bonds have 12 years remaining to maturity. Interest is paid

ID: 2699764 • Letter: 1

Question

1) Wilson Wonders's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity?


2) Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 16 years, have a face value of $1,000, and a yield to maturity of 8%. What is the price of the bonds?


Please show all calculations and explain where the numbers come from.

Explanation / Answer

1) 850= 100PVIFA(YTM,12)+ 1000PVIF(YTM,12) YTM= 12.48% 2) PV= 50 PVIFA(4%,32)+1000PVIF(4%,32) PV= (50x17.87)+285.058 = 893.678+285.058 = $1178.736

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