Fin 446 HW1

What is the cash flow of a 10-year bond that pays coupon interest semiannually, has a coupon rate of 7%, and has a par value of $100,000.

CF 1: semi annual Cf=(coup rate/times compounded)*par value =(0.07/2)*100000=3500 F1: 10 yrs * 2 - 1 CF 2: par value + CF1= 103,500

a) Show the cash flows for the following four bonds, each of which has a par value of $1,000, and pay interest semiannually b) Calculate the yield to maturity for the four bonds. Bond Z Coupon Rate 0% Years to Maturity 10 Price$456.39

CF 1=coup rate/2*1000=$0 F=2*years-1=19 CF2= Cf1+ 1000= 1000 F2=1 n=years*2 PMT=coup/2 *1000 PV= -Price FV=1000 CPT I/Y = 8

a) Show the cash flows for the following four bonds, each of which has a par value of $1,000, and pay interest semiannually b) Calculate the yield to maturity for the four bonds. Bond W Coupon Rate 7% Years to Maturity 5 Price$884.20

CF 1=coup rate/2*1000=$35 F=2*years-1=9 CF2= Cf1+ 1000= 1035 F2=1 n=years*2 PMT=coup/2 *1000 PV= -Price FV=1000 CPT I/Y = 10

a) Show the cash flows for the following four bonds, each of which has a par value of $1,000, and pay interest semiannually b) Calculate the yield to maturity for the four bonds. Bond X Coupon Rate 8% Years to Maturity 7 Price$948.90

CF 1=coup rate/2*1000=$40 F=2*years-1=13 CF2= Cf1+ 1000= 1040 F2=1 n=years*2 PMT=coup/2 *1000 PV= -Price FV=1000 CPT I/Y =9

a) Show the cash flows for the following four bonds, each of which has a par value of $1,000, and pay interest semiannually b) Calculate the yield to maturity for the four bonds. Bond Y Coupon Rate 9% Years to Maturity 4 Price$967.70

CF 1=coup rate/2*1000=$45 F=2*years-1=7 CF2= Cf1+ 1000= 1045 F2=1 n=years*2 PMT=coup/2 *1000 PV= -Price FV=1000 CPT I/Y =10

Calculate for each of the following bonds the price per $1,000 of par value assuming semiannual coupon payments. Bond C Coupon Rate 6% Years to Maturity 15 Required yield (%) 10

I/y= RY/2 = 10/2= 5% n=2*years=30 PMT=coup rate *par value/2= -30 FV=-1000 CPT PV = 692.55

Calculate for each of the following bonds the price per $1,000 of par value assuming semiannual coupon payments. Bond A Coupon Rate 8% Years to Maturity 9 Required yield (%) 7

I/y= RY/2 = 7/2= 3.5% n=2*years=18 PMT=coup rate *par value/2=8%*1000/2= -40 FV=-1000 CPT PV = 1065.95 The required yield must be divided by 2 because the bond pays interest semiannually. The years are multiplied by 2 also because the interest is paid semiannually. The coupon payment is computed as the par value ($1,000) times the coupon rate, again divided by 2. The coupon payment and principal repayment are treated as negative so that the price comes out positive.

Calculate for each of the following bonds the price per $1,000 of par value assuming semiannual coupon payments. Bond D Coupon Rate 0% Years to Maturity 14 Required yield (%) 8

I/y= RY/2 = 8/2= 4% n=2*years=28 PMT=coup rate *par value/2=0%*1000/2= 0 FV=-1000 CPT PV = 333.48

Calculate for each of the following bonds the price per $1,000 of par value assuming semiannual coupon payments. Bond B Coupon Rate 9% Years to Maturity 20 Required yield (%) 9

I/y= RY/2 = 9/2= 4.5% n=2*years=40 PMT=coup rate *par value/2= -45 FV=-1000 CPT PV =1000

What is the cash flow of a seven-year bond that pays no coupon interest and has a par value of $10,000?

The cash flow is $10,000 at the end of the 7th year.