##### Finance questions....

 Business & Finance Tutor: None Selected Time limit: 1 Day

1.Sadik Inc.'s bonds currently sell for \$1,270 and have a par value of \$1,000.  They pay a \$105 annual coupon and have a 15-year maturity, but they can be called in 5 years at \$1,100.  What is their yield to call (YTC)?

2.A 25-year, \$1,000 par value bond has an 8.5% annual payment coupon.  The bond currently sells for \$900.  If the yield to maturity remains at its current rate, what will the price be 5 years from now?

Jul 12th, 2015

A 25-year, \$1,000 par value bond has an 8.5% annual payment coupon.  The bond currently sells for \$900.  If the yield to maturity remains at its current rate, what will the price be 5 years from now?

First you have to calculate the current yield to maturity. You do this by solving for the RATE function using the following criteria:

Number of Periods = 25
Annual Payment = \$85 (\$1,000 X 8.5%)
Future Value \$1,000
Present Value -\$875

The RATE calculates to 9.863%

Now calculate the Present Value using this criteria

Future Value \$1,000
Number of Periods = 20 (25 - 5)
Annual Payment = \$85 (\$1,000 X 8.5%)
RATE = 9.863%

The Present Value calculates to -\$882.90

So in five years, the bond will sell for \$882.90

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Jul 12th, 2015

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Jul 12th, 2015
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Jul 12th, 2015
May 27th, 2017
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