Business Finance Ch6 Quiz - Connect
You find the following corporate bond quotes. To calculate the number of years until maturity, assume that it is currently January 15, 2019. The bonds have a par value of $2,000 and semiannual coupons. Company(Ticker)CouponMaturityLastPriceLastYieldEST $ Vol(000's) Xenon, Inc. (XIC)7.20 Jan 15, 2043 94.399 ?? 57,380 Kenny Corp. (KCC)7.30 Jan 15, 2040 ?? 6.38 48,959 Williams Co. (WICO)?? Jan 15, 2047 94.915 7.20 43,820 What is the yield to maturity for the bond issued by Xenon, Inc.? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
(a) For Xenon Bond Par value = $2,000 Last price = $1887.98 // ($2,000 × 94.399%) # of yrs in maturity = 24 // (2043 - 2019) Face value(FV) = 2,000 Coupon rate = 7.20% Semiannual coupon payment = 72.00 Yrs remaining for maturity = 24 yrs Current value = -1887.98 =RATE(24*2,72,-1887.98,2000) = 3.86% Yield to maturity = rate x 2 Yield to maturity = 3.86% x 2 Yield to maturity = 7.72%
Big Canyon Enterprises has bonds on the market making annual payments, with 14 years to maturity, a par value of $1,000, and a price of $958. At this price, the bonds yield 8.9 percent. What must the coupon rate be on the bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Coupon payment = Face value x coupon rate Coupon Year, Cash flow, PVF(7.30%), PV 1, 83.65, 2, 83.65 3, 83.65 4, 83.65 5, 83.65 6, 83.65 7, 83.65 8, 83.65 9, 83.65 10, 83.65 12, 83.65 13, 83.65 14, 83.65 = 958.11 WORK https://gyazo.com/7e51b38dbce7bd651c34b9f79df88b93 Answer: Coupon rate = 8.365%
BDJ Co. wants to issue new 19-year bonds for some much-needed expansion projects. The company currently has 8.8 percent coupon bonds on the market that sell for $1,128, make semiannual payments, have a par value of $1,000, and mature in 19 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Coupon rate = 8.80% NPER = 38// (19 yrs x 2 periods) PMT = 44 // (1000 x 8.8%)/2 Face Value = 1000 Price(PV) = 1,128 Rate = 3.78% Rate(nper,pmt,-pv,fv) Rate(38,44,-1128,1000) Rate = 3.78 Yield to Maturity = 3.78 x 2 Yield to Maturity = 7.55%
Suppose the following bond quote for IOU Corporation appears in the financial page of today's newspaper. Assume the bond has a face value of $1,000, and the current date is April 15, 2019. Company(Ticker)CouponMaturityLastPriceLastYieldEST Vol(000s)IOU (IOU)7.00Apr 15, 203592.792??79 a. What is the yield to maturity of the bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b.What is the current yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
FV = 1000 coupon = 7% Coupons = 35 // 1000 x 7%/2) yrs = 16 yrs periods in a yrs = 2 Last price = 927.92 // (1000 x 92.792%) =RATE(16*2,-35,927.92,-1000) = 3.89 YTM (a) YTM (annual) = 3.89 x 2 YTM(annual) = 7.78% (b) Current Yield = (1000 x 7%)/927.92 Current Yield = 7.54%
You purchase a bond with an invoice price of $1,145. The bond has a coupon rate of 10.9 percent, semiannual coupons, and a par value of $1,000, and there are four months to the next coupon date. What is the clean price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
P = Purchase price C = Coupon rate F = Frequency D = Day since last coupon rate T = total number of days in pay period P = 1,000 C = 10.9% F = 2 Semiannually D = 2 // (6 months - 4 months) T = 6 Dirty price = 1,145 Accrued interest = P x C/F x D/T Accrued interest = 1000 x 0.109/2 x (2/6) Accrued interest = 18.166666 Clean price = dirty price - accrued interest Clean price = 1145 - 18.166666 Clean Price = 1126.83
Vulcan, Inc., has 8.3 percent coupon bonds on the market that have 7 years left to maturity. The bonds make annual payments and have a par value of $1,000. If the YTM on these bonds is 10.3 percent, what is the current bond price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Price of bond = PV of Cash flow 1) $83.00 0.9066$ 75.25 2)$83.00 0.8220$ 68.22 3)$83.00 0.7452$ 61.85 4)$ 83.00 0.6756$ 56.08 5)$ 83.00 0.6125$ 50.84 6)$ 83.00 0.5553$ 46.09 7)$ 83.00 0.5035$ 41.79 7)$ 1,000.00 0.5035$ 503.47 Bond price = 903.59
You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2019 and the bond has a par value of $1,000. RateMaturityMo/YrBidAskedChgAskYld?? May 26 103.5423 103.6301 +.3261 2.269 6.102 May 31 104.4913 104.6370 +.4257 ?? 6.148 May 41 ?? ?? +.5366 3.971 In the above table, find the Treasury bond that matures in May 2026. What is the coupon rate for this bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Semi Annual Yrs = 7 // (2026-2019) YTM = 2.269% Rate = ? Face Value = 100 Market interest rate = 1.1345% // (2.269%/2) No. of Periods = 14 // (7x2)
Henley Corporation has bonds on the market with 11 years to maturity, a YTM of 9.5 percent, a par value of $1,000, and a current price of $946. The bonds make semiannual payments. What must the coupon rate be on the bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Semi Annual Price of bond = PV of interest + PV of par value YTM = 4.75% // (9.5%/2) Period = 22 // (11 x 2) PVIFA(R%,n) or (1-(1+r)^-n)/r PVIFA(4.75%,22) = 13.46829 PVIFA(R%,n) or (1/(1+r)^n PVIFA(4.75%,22) = 0.36026 946=1000xaxPVIF(4.75%,22)+1000xPVIF(4.75%,22) a = 585.74/13468.29 a = 4.34903% Coupon rate = 4.34903% x 2 Coupon rate = 8.70%
Dufner Co. issued 14-year bonds one year ago at a coupon rate of 7.9 percent. The bonds make semiannual payments. If the YTM on these bonds is 5.6 percent, what is the current dollar price assuming a par value of $1,000? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Semi Annually Face Value = 1,000 Coupon payment = (1000 x 7.9%x50%) Coupon payment = 39.5 Number of periods = 13 x 2 Number of periods = 26 Periodic YTM = 5.6%/2 Periodic YTM = 2.8% Price = -PV(rate,nper,pmt,fv)) Price = -PV(2.8%,26,39.5,1000) Price = 1,210.40
Union Local School District has bonds outstanding with a coupon rate of 3.3 percent paid semiannually and 20 years to maturity. The yield to maturity on these bonds is 3.7 percent and the bonds have a par value of $10,000. What is the price of the bonds? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Semi Annually: Coupon rate = 3.3% Yr to maturity = 20 yrs NPER = 40 // (20 x 2) PMT = 165 // (10,000 x 3.3%)/2 Face Value = 10,000 Yield = 3.7% Rate = Yield/ 2 Rate = 3.7%/2 Rate = 1.85% Price = -PV(rate,nper,pmt,fv)) Price = -PV(1.85%,40,165,10,000) Price = $9,438.22
