75. YTM and YTC--semiannual bond Answer: e Diff: E
To calculate YTM:
N = 28; PV = -1075; PMT = 40; FV = 1000; and then solve for I/YR = 3.57% 2 = 7.14%.
To calculate YTC:
N = 10; PV = -1075; PMT = 40; FV = 1050; and then solve for I/YR = 3.52% 2 = 7.05%.
76. Yield to maturity and bond value—annual bond Answer: d Diff: E
Step 1: Find the YTM. N = 20; PV = -925; PMT = 90; FV = 1000; and then solve for I = YTM = 9.8733%.
Step 2: Solve for P5. In 5 years, there will be 15 years left until maturity, so the price at t = 5 is: N = 15; I/YR = 9.8733; PMT = 90; FV = 1000; and then solve for PV = -$933.09. V B = $933.09.
77 . Current yield Answer: b Diff: E
Current yield = Annual coupon payment/Current price.
Step 1: Find the price of the bond:
N = 9; I/YR = 10; PMT = 70; FV = 1000; and then solve for PV = -$827.23. VB = $827.23.
Step 2: Calculate the current yield: CY = $70/$827.23 = 8.46%.
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