SolutionsCh78文档格式.docx

1、c. If a change in the bankruptcy code made it more difficult for bondholders to receive payments in the event a firm declared bankruptcy, then the bonds YTM would increase.d. If the economy entered a recession, then the possibility of a firm defaulting on its bond would increase; consequently, its Y

2、TM would increase.e. If a bond were to become subordinated to another debt issue, then the bonds YTM would increase.7-7 As an investor with a short investment horizon, I would view the 20-year Treasury security as being more risky than the 1-year Treasury security. If I bought the 20-year security,

3、I would bear a considerable amount of interest rate risk. Since my investment horizon is only one year, I would have to sell the 20-year security one year from now, and the price I would receive for it would depend on what happened to interest rates during that year. However, if I purchased the 1-ye

4、ar security I would be assured of receiving my principal at the end of that one year, which is the 1-year Treasurys maturity date.SOLUTIONS TO END-OF-CHAPTER PROBLEMS7-1 With your financial calculator, enter the following:N = 10; I = YTM = 9%; PMT = 0.08 1,000 = 80; FV = 1000; PV = VB = ?PV = $935.8

5、2.7-2 With your financial calculator, enter the following to find YTM:N = 10 2 = 20; PV = -1100; PMT = 0.08/2 1,000 = 40; I = YTM = ?YTM = 3.31% 2 = 6.62%.With your financial calculator, enter the following to find YTC:N = 5 2 = 10; FV = 1050; I = YTC = ?YTC = 3.24% 2 = 6.49%.7-3 The problem asks yo

6、u to find the price of a bond, given the following facts: N = 16; I = 8.5/2 = 4.25; PMT = 45; FV = 1000.With a financial calculator, solve for PV = $1,028.60.7-4 VB = $985; M = $1,000; Int = 0.07 $1,000 = $70. a. Current yield = Annual interest/Current price of bond = $70/$985.00 = 7.11%. b. N = 10;

7、 PV = -985; PMT = 70; YTM = ? Solve for I = YTM = 7.2157% 7.22%. c. N = 7; I = 7.2157; PV = ? Solve for VB = PV = $988.46.7-5 a. 1. 5%: Bond L: Input N = 15, I = 5, PMT = 100, FV = 1000, PV = ?, PV = $1,518.98.Bond S: Change N = 1, PV = ? PV = $1,047.62.2. 8%: From Bond S inputs, change N = 15 and I

8、 = 8, PV = ?, PV = $1,171.19. PV = $1,018.52.3. 12%: From Bond S inputs, change N = 15 and I = 12, PV = ?, PV = $863.78. PV = $982.14.b. Think about a bond that matures in one month. Its present value is influenced primarily by the maturity value, which will be received in only one month. Even if in

9、terest rates double, the price of the bond will still be close to $1,000. A 1-year bonds value would fluctuate more than the one-month bonds value because of the difference in the timing of receipts. However, its value would still be fairly close to $1,000 even if interest rates doubled. A long-term

10、 bond paying semiannual coupons, on the other hand, will be dominated by distant receipts, receipts that are multiplied by 1/（1 + kd/2）t, and if kd increases, these multipliers will decrease significantly. Another way to view this problem is from an opportunity point of view. A 1-month bond can be r

11、einvested at the new rate very quickly, and hence the opportunity to invest at this new rate is not lost; however, the long-term bond locks in subnormal returns for a long period of time.7-6 a. VB = M = $1,000. I = 0.09（$1,000） = $90.1. VB = $829: Input N = 4, PV = -829, PMT = 90, FV = 1000, I = ? I

12、 = 14.99%.2. VB = $1,104: Change PV = -1104, I = ? I = 6.00%.b. Yes. At a price of $829, the yield to maturity, 15 percent, is greater than your required rate of return of 12 percent. If your required rate of return were 12 percent, you should be willing to buy the bond at any price below $908.88.7-

13、7 The rate of return is approximately 15.03 percent, found with a calculator using the following inputs:N = 6; PV = -1000; PMT = 140; FV = 1090; I = ? Solve for I = 15.03%.7-8 a. Using a financial calculator, input the following:N = 20, PV = -1100, PMT = 60, FV = 1000, and solve for I = 5.1849%.Howe

14、ver, this is a periodic rate. The nominal annual rate = 5.1849%（2） = 10.3699% 10.37%.b. The current yield = $120/$1,100 = 10.91%.c. YTM = Current Yield + Capital Gains （Loss） Yield10.37% = 10.91% + Capital Loss Yield-0.54% = Capital Loss Yield.d. Using a financial calculator, input the following:N =

15、 8, PV = -1100, PMT = 60, FV = 1060, and solve for I = 5.0748%.However, this is a periodic rate. The nominal annual rate = 5.0748%（2） = 10.1495% 10.15%.7-9 The problem asks you to solve for the YTM, given the following facts:N = 5, PMT = 80, and FV = 1000. In order to solve for I we need PV. However

16、, you are also given that the current yield is equal to 8.21%. Given this information, we can find PV.Current yield = Annual interest/Current price 0.0821 = $80/PV PV = $80/0.0821 = $974.42.Now, solve for the YTM with a financial calculator:N = 5, PV = -974.42, PMT = 80, and FV = 1000. Solve for I =

17、 YTM = 8.65%.7-10 The problem asks you to solve for the current yield, given the following facts: N = 14, I = 10.5883/2 = 5.29415, PV = -1020, and FV = 1000. In order to solve for the current yield we need to find PMT. With a financial calculator, we find PMT = $55.00. However, because the bond is a

18、 semiannual coupon bond this amount needs to be multiplied by 2 to obtain the annual interest payment: $55.00（2） = $110.00. Finally, find the current yield as follows:Current yield = Annual interest/Current price = $110/$1,020 = 10.78%.7-11 The bond is selling at a large premium, which means that it

19、s coupon rate is much higher than the going rate of interest. Therefore, the bond is likely to be called-it is more likely to be called than to remain outstanding until it matures. Thus, it will probably provide a return equal to the YTC rather than the YTM. So, there is no point in calculating the

20、YTM-just calculate the YTC. Enter these values:N = 10, PV = -1353.54, PMT = 70, FV = 1050, and then solve for I.The periodic rate is 3.2366 percent, so the nominal YTC is 2 3.2366% = 6.4733% 6.47%. This would be close to the going rate, and it is about what the firm would have to pay on new bonds.7-

21、12 a. To find the YTM:N = 10, PV = -1175, PMT = 110, FV = 1000I = YTM = 8.35%.b. To find the YTC, if called in Year 5:N = 5, PV = -1175, PMT = 110, FV = 1090I = YTC = 8.13%.c. The bonds are selling at a premium which indicates that interest rates have fallen since the bonds were originally issued. A

22、ssuming that interest rates do not change from the present level, investors would expect to earn the yield to call. （Note that the YTC is less than the YTM.）d. Similarly from above, YTC can be found, if called in each subsequent year.If called in Year 6:N = 6, PV = -1175, PMT = 110, FV = 1080I = YTM

23、 = 8.27%.If called in Year 7:N = 7, PV = -1175, PMT = 110, FV = 1070I = YTM = 8.37%.If called in Year 8:N = 8, PV = -1175, PMT = 110, FV = 1060I = YTM = 8.46%.If called in Year 9:N = 9, PV = -1175, PMT = 110, FV = 1050I = YTM = 8.53%.According to these calculations, the latest investors might expect a call of the bonds is in Year 6. This is the last year that the expected YTC will be less