1) Calculate the Yield to Maturity of 2 bonds that have a decimal coupon rate .1
ID: 2789028 • Letter: 1
Question
1) Calculate the Yield to Maturity of 2 bonds that have a decimal coupon rate .11665, mature on November 30, 2020, and have a current price of 95 5/8 . Today's date is March 1, 2012
2) A bond coupon rate is 7 3/4%; It's price quoted on the OTCBB is 101, and it matures in 8 1/2 years. What is its current yield?
3) You just got a bond interest check for $65.95. You paid 97.625 for this bond 3 years ago, and it is quoted today at 99 1/11. If it matures in 6 years and 4 months, what is it current yield?
4) The CY on a bond is 4 1/8%. If it is quoted today at 102 7/8, how much would an interest check be on this security if you owned 9 of them?
Explanation / Answer
Coupon rate = 11.665%
Current Price = 95.625
Par Value = 100
Term = 8.7514 years
Bond Price = Coupon/ (1+Y) + Coupon/ (1+Y)2 + Coupon/ (1+Y)3 + Coupon/ (1+Y)4 + Coupon/ (1+Y)5 + Coupon/ (1+Y)6 + Coupon/ (1+Y)7 + Coupon/ (1+Y)8.7514 + Maturity/(1+y)8.7514
95.625 = 11.665/ (1+Y) + 11.665/ (1+Y)2 + 11.665/ (1+Y)3 + 11.665/ (1+Y)4 + 11.655/ (1+Y)5 + 11.655/ (1+Y)6 + 11.655/ (1+Y)7 + 11.665/(1+Y)8 +11.655/ (1+Y)8.7514 + 100/(1+y)8.7514
Solving by trial and error in excel, Y = 12.732%
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