Analyzing coupon bonds: 10a. Determine today’s price and trading status of the f

Question

Analyzing coupon bonds:

10a. Determine today’s price and trading status of the following three bonds given the yield curve for fixed income instruments that day. Assume each has par value (face value) of $1000.

The Yield Curve of December 16, 2015

Market status refers to either discount or premium

Bond

Time to

Maturity

Coupon

Rate

Price

Market

Status

IBM

30

4.72%

EXXON

20

4.15%

10b. What is the yield of the $1,000 Ford Motors 7.4% coupon bond maturing in 30 years if the current price is $1,069.29?

10c. You decide to sell the $1,000 Ford Motors 7.4% coupon bond after holding it for 20 years. If the market rate is 7.1%, what is the selling price of the bond?

10d.How much did you lose or gain if the market rate had been 7.2%

Market status refers to either discount or premium

Explanation / Answer

Analyzing coupon bonds: 10a. Determine today’s price and trading status of the f

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