Bond Problems: Work problems 6-1 through 6-6. Put your solutions in Excel with a tab for each problem.
Intercontinental Baseball Manufacturers has an outstanding bond with a $1,000 face value that matures in 10 years. The bond, which pays $25 interest every six months ($50 per year), is currently selling for $598.55. What is the bond's yield to maturity?
Rick bought a bond when it was issued by Macroflex Corporation 14 years ago. The bond, which has a $1000 face value and a coupon rate equal to 10 percent, matures in six years. Interest is paid every six months; the next interest payment is scheduled for six months from today. If the yield on similar risk investments is 14 percent, what is the current market value (price) of the bond?
It is now January 2, 2012, and you are considering the purchase of an outstanding Puckett Corporation bond that was issued on January 4, 2010. The Puckett bond has a 9.5 percent annual coupon and a 30-year original maturity (it matures on December 30, 2039). Interest rates have declined since the bond was issued, and the bond is currecntly selling for $1,165.75. What is the yield to maturity in 2012 for the Puckett bond? The bond's face value is $1,000.
Robert paid $1,000 for a 10-year bond with a coupon rate equal to 8 percent when it was issued on January 2. If Robert sold the bond at the end of the year in which it was issued for a market price of $925, what return would he earn? What portion of this return represents capital gains, and what portion represents the current yield?
Tapley Corporation's 14 percent coupon rate, semiannual payment, $1000 par value bonds mature in 30 years. The bonds sell at a price of $1353.54, and their yield curve is flat. Assuming that interest rates in the general economy are expected to remain at their current level, what is the best estimate of Tapley's simple interest rate on new bonds?
De'Andre purchased one of XXXL Shirt Company's bonds last year when the market interest rate on similar-risk bonds was 6 percent. When he purchased the bond, it had 7 years remaining until maturity. The bond's coupon rate of interest (paid semi-annualy) is 5 percent, and its maturity value is $1000. Today, the market rate on similar risk bonds as the one De'Andre purchased one year ago is 4 percent. (A) If he were to sell the bond today, what return would De'Andre earn? (B) What portion of this return represents the capital gains, and what portion represents the current yield?
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