Bond Valuation, economics homework help

Anonymous
timer Asked: Jul 31st, 2016
account_balance_wallet $10

Question description

Hello!

  1. Using Excel, complete the following problems in your textbook:
    1. Bond Valuation: Problems 3, 6 and 10 on page 233
    2. Interest Rate Risk: Problems 19 and 20 on page 234
    3. Yield to Maturity & Rates of Return: Problems 12 and 21 on page 234
Please complete the above problems in the attached xls.

Thanks!

3Valuing Bonds [LO2] Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 23 years to maturity, and a coupon rate of 5.8 percent paid annually. If the yield to maturity is 4.7 percent, what is the current price of the bond?

6Bond Prices LO2> Sqeekers Co. issued 15-year bonds a year ago at a coupon rate of 4.1 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 4.5 percent, what is the current bond price?

10Valuing Bonds [LO2] Yan Yan Corp. has a $2,000 par value bond outstanding with a coupon rate of 4.9 percent paid semiannually and 13 years to maturity. The yield to maturity of the bond is 3.8 percent. What is the price of the bond?

19.Interest Rate Risk [LO2] Both Bond Sam and Bond Dave have 6.5 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 3 years to maturity, whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam? Of Bond Dave? If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Sam be then? Of Bond Dave? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest rate risk of longer-term bonds?

20. Interest Rate Risk [LO2] Bond J has a coupon rate of 3 percent. Bond K has a coupon rate of 9 percent. Both bonds have 19 years to maturity, make semiannual payments, and have a YTM of 6 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? What if rates suddenly fall by 2 percent instead? What does this problem tell you about the interest rate risk of lower-coupon bonds?

12.Calculating Real Rates of Return [LO4] If Treasury bills are currently paying 5.1 percent and the inflation rate is 2.2 percent, what is the approximate real rate of interest? The exact real rate?

21.Bond Yields [LO2] Bourdon Software has 6.4 percent coupon bonds on the market with 18 years to maturity. The bonds make semiannual payments and currently sell for 106.8 percent of par. What is the current yield on the bonds? The YTM? The effective annual yield?

Tutor Answer

Selenica
School: New York University

Hi there,Attached is the same Excel file, but now with 19 visible and explanations provided for 21.If anything else needs to be changed, please let me know :)Selenica

SOLUTION:
A)

Future Value
PMT
Nper
Rate
Coupon Rate

1000.00
58.00
23.00
4.70%
5.80%

PMT = Par Value * Coupon Rate
PMT = 1,000 * 5.8%
PMT

58.00

Using excel formula,
Present Value

$1,152.66

SOLUTION:
A)

Future Value1000.00
PMT
41.00
Nper
30.00
Rate
4.50%
Coupon Rate 4.10%
PMT = Par Value * Coupon Rate
PMT = 1,000 * 4.1%
PMT

41.00

Using excel formula,
Present Value
$934.84

If rates rose by 2%:
BondSam Value
Ra...

flag Report DMCA
Review

Anonymous
Awesome! Exactly what I wanted.

Similar Questions
Hot Questions
Related Tags

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors