Solutions to Chapter 6Valuing BondsWord文档下载推荐.docx

1、As coupon rate remains the same and the bond price decreases, the current yield increases.2. When the bond is selling at a discount, $970 in this case, the yield to maturity is greater than 8%. We know that if the yield to maturity were 8%, the bond would sell at par. At a price below par, the yield

2、 to maturity exceeds the coupon rate. Current yield = coupon payment/bond price = $80/$970 Therefore, current yield is also greater than 8%.3. Coupon payment = 0.08 $1,000 = $80 Current yield = $80/bond price = 0.07 Therefore: bond price = $80/0.07 = $1,142.864. Coupon rate = $80/$1,000 = 0.080 = 8.

3、0% Current yield = $80/$950 = 0.0842 = 8.42% To compute the yield to maturity, use trial and error to solve for r in the following equation: r = 9.119% Using a financial calculator, compute the yield to maturity by entering:n = 6; PV = （）950; FV = 1000; PMT = 80, compute i = 9.119% Verify the soluti

4、on as follows:（difference due to rounding）5. In order for the bond to sell at par, the coupon rate must equal the yield to maturity. Since Circular bonds yield 9.119%, this must be the coupon rate.6. a. Current yield = coupon/price = $80/$1,100 = 0.0727 = 7.27%b. To compute the yield to maturity, us

5、e trial and error to solve for r in the following equation: r = 6.602%n = 10; PV = （）1100; PMT = 80, compute i = 6.602%7. When the bond is selling at face value, its yield to maturity equals its coupon rate. This firms bonds are selling at a yield to maturity of 9.25%. So the coupon rate on the new

6、bonds must be 9.25% if they are to sell at face value.8. The bond pays a coupon of 7.125% which means annual interest is $71.25. The bond is selling for: 130 5/32 = $1,301.5625. Therefore, the current yield is: $71.25/$1301.5625 = 5.47% The current yield exceeds the yield-to-maturity on the bond bec

7、ause the bond is selling at a premium. At maturity the holder of the bond will receive only the $1,000 face value, reducing the total return on investment. 9. Bond 1 Year 1: Year 2: Using a financial calculator: PMT = 80, FV = 1000, i = 10%, n = 10; compute PV0 = $877.11 PMT = 80, FV = 1000, i = 10%

8、, n = 9; compute PV1 = $884.82 Rate of return = Bond 2 PMT = 120, FV = 1000, i = 10%, n = 10; compute PV0 = $1,122.89 PMT = 120, FV = 1000, i = 10%, n = 9; compute PV1 = $1,115.18 Rate of Return = Both bonds provide the same rate of return.10. a. If yield to maturity = 8%, price will be $1,000.b. Ra

9、te of return = c. Real return = 1 = 11. a. With a par value of $1,000 and a coupon rate of 8%, the bondholder receives $80 per year.b. c. If the yield to maturity is 6%, the bond will sell for:12. a. To compute the yield to maturity, use trial and error to solve for r in the following equation: r =

10、8.971%n = 30; PV = （）900; PMT = 80, compute i = 8.971%b. Since the bond is selling for face value, the yield to maturity = 8.000% c. To compute the yield to maturity, use trial and error to solve for r in the following equation: r = 7.180% PMT = 80, compute i = 7.180%13. a. To compute the yield to m

11、aturity, use trial and error to solve for r in the following equation: r = 4.483%n = 60; PMT = 40, compute i = 4.483% Therefore, the annualized bond equivalent yield to maturity is: 4.483% 2 = 8.966%b. Since the bond is selling for face value, the semi-annual yield = 4% 4% 2 = 8%c. To compute the yield to maturity, use trial and error to solve for r in the following equation: r = 3.592% PMT = 40, compute