protectionToday Singleton called the bonds Sree the bonds h

protection.Today Singleton called the bonds . Sree the bonds have been called, investors will no longer need to consider reinvestment rate risk. Check My Work

Solution

Question 7.6 (Bonds with semi annual coupons, yield to maturity)

part-a

Q1: What is the yield to maturity of the bond at the current market price of $791?

This can be calculated in excel as =rate(nper,pmt,pv,fv)*2 (Since semi annual) where nper = 6 years= 12 semi-annual periods, pmt = 9%*100 =$90 annually and $45 semi annually, PV =-791 and FV =1000

The YTM of this bond = rate(12,45,-791,1000)*2 = 14.31%

Q2: What is the yield to maturity of the bond at the current market price of $1,147?

The YTM of this bond = rate(12,45,-1147,1000)*2 = 6.04%

part -b : Answer is V: You would buy the bond as the yield to maturity at this price is greater than the required rate of return

Note: We have answered all the parts of one full question which is the 2nd image. Kinbdly post each image seperately. Only one full question (one image) can be answered in the given time