Excel format-Fundamental of Finace

| March 30, 2017

Question
Excel format-Fundamental of Finace

1)Callaghan Motors’ bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and thecoupon interest rate is 8 percent. The bonds have a yield to maturity of 9 percent. WHAT IS THE CURRENT MARKET PRICE OF THESE BONDS?

2) A bond as a $1,000 par value, 10 years to maturity a 7 percent annual coupon, and sells for $985

3)NungesserCo’soutstanding bonds have a $1000 par value, a 9 percent semiannual coupon, 8 years to maturity, and 8.5 percent YTM, what is the bond’s price?

4) A firm’s bond have maturity of 10 years of maturity with $1,000 face value and 8 percent semiannual coupon, are callable in 5 years at $1,050, and currently sell at price of 1,100, what is the yield to maturity and their yield to call? What return should investors expect to ear on this bond?

5)An investor purchased the following 5 bonds. Each of them had an 8% yield to maturity on the purchase day. Immediately after she purchased them, interest rate fell and each of them had a new YTM of 7 %. What is the percentage change in price for each bond after decline in interest rates? Fill in the following table

Price@8% Price @7% %change

6)10-year, 10% ____________ ___________ ____________

10-year zero

5-year zero

30 year zero

$100 perpetuity

7)Six years ago, the Singleton Co issued 20 year bonds with a 14% annual coupon rate at their $1,000 par value. The bonds had a 9 % call premium, with 5 yrs of call protection. Today, singleton called the bonds. Compute the realized rate of return for an investor who purchased the bonds when they were issued and held then until they were called. Explain why the investor should or should not be happy that Singleton called them.

8)Hayman Co bonds have 4 years let to maturity. Interests are pay annually, and the bonds have a $1,000 par value and the coupon rate of 9%.

a) What is the yield to maturity ata current market price of (1) $829 or (2) $1,104?

b) Would you pay $829 for each bond if you though that “a fair” market interest rate for such bonds was 12%-that is ifrd=12%? Explain

9) It is now January 1, 2006, and you are considering the purchase of an outstanding bond that was issued on January 1, 2004. It has a 9.5 % annual coupon anda 30 yr of call protection (until December 31, 2008), after which time it can be called at 109% of par or $1,090). Interest rates have declined since it was issued, and is now selling at 116.575 % of par, or $1, 165.75.

a) What is the yield to maturity? What is the yield to call?

b) If you bought this bond, which return you think you would actually earn? Explain.

c) Suppose that the bond has been selling at a discount rather than a premium. Would the yield to maturity then have been the most likely actual return, or would the yield to call have been most likely?

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