Practice 7.a

Yan Yan Corp. has a $2,000 par value bond outstanding with a coupon rate of 4.4 percent paid semiannually and 18 years to maturity. The yield to maturity on this bond is 4.7 percent. What is the price of the bond?

$1,927.66 N= 18x2= 36 I/Y= 4.7/2= 2.35 PMT= 44 FV= 2,000 CPT PV= 1,927.66

Wesimann Co. issued 10-year bonds a year ago at a coupon rate of 7.6 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 5.9 percent, what is the current bond price? MY NOTE: SEMIANNUAL so divide by 2 + The bond was issued 1 year ago, with 10 years to maturity, so there are 9 years left on the bond.

$1125.72 N= 9x2= 18 I/Y= 5.9/2= 2.95 PMT= 76/2= 38 FV= 1000 CPT PV= 1125.72

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, 10 years to maturity, and a coupon rate of 6.8 percent paid annually. If the yield to maturity is 7.9 percent, what is the current price of the bond?

Euro 925.86 N= 10 I/Y= 7.9 PMT= 68 FV= 1000 CPT PV= 925.86