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Class Problems Chapter 6 - Haryo Indra

This document contains questions about calculating bond values and yields given information about the bond's par value, coupon rate, maturity date, and market yield or price. It provides sample calculations and tables of bond information to use in solving the questions. The questions assess understanding of how a bond's price is determined by current interest rates and time to maturity.

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Haryo Hartoyo
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185 views3 pages

Class Problems Chapter 6 - Haryo Indra

This document contains questions about calculating bond values and yields given information about the bond's par value, coupon rate, maturity date, and market yield or price. It provides sample calculations and tables of bond information to use in solving the questions. The questions assess understanding of how a bond's price is determined by current interest rates and time to maturity.

Uploaded by

Haryo Hartoyo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Please answer the following questions.

Table 6.2

34) (a) Calculate the current value of Bond L. (See Table 6.2)
(b) What will happen to the value/price as the bond approaches maturity?

35) Calculate the current value of Bond M. (See Table 6.2)

36) Calculate the current value of Bond M if the time of maturity is six years. (See Table 6.2)

37) (a) Calculate the current value of Bond N. (See Table 6.2)
(b) What will happen to value/price as the bond approaches maturity?

Answer :

M(year=6
L M N )
Par Value 1000 100 500 100
Coupon Int 9% 10% 18% 10%
Payment 90 10 90 10
Year 5 8 17 6
RR 6% 10% 15% 10%

($1,126.37 ($100.00
PV ) ) ($590.71) ($100.00)

34. a). $1.1126,37


b). It value at premium now. It will decrease in the future. So if we keep the bond until maturity, it
will be loss
35. $100
36 It will remain the same
37 a). $590.71
b). It value at premium now. It will decrease in the future. So if we keep the bond until maturity, it
will be loss
38) Hewitt Packing Company has an issue of $1,000 par value bonds with a 14 percent coupon interest
rate outstanding. The issue pays interest semiannually and has 10 years remaining to its maturity date.
Bonds of similar risk are currently selling to yield a 12 percent rate of return. What is the value of these
Hewitt Packing Company bonds?

Answer :

Hewitt
Company
Par Value 1000
Coupon Int 14%
Payment 70
Year 20
RR 6%

PV ($1,114.70)

39) To expand its business, the Kingston Outlet factory would like to issue a bond with par value of
$1,000, coupon rate of 10 percent, and maturity of 10 years from now. What is the value of the bond if the
required rate of return is 1) 8 percent, 2) 10 percent, and 3) 12 percent?

Answer :

1) 2) 3)
Par Value 1000 1000 1000
Coupon Int 10% 10% 10%
Payment 100 100 100
Year 10 10 10
RR 8% 10% 12%

($1,134.20 ($1,000.00
PV ) ) ($887.00)

41) Zhen Yi Computers has an outstanding issue of bond with a par value of $1,000, paying 12 percent
coupon rate semiannually. The bond was issued 25 years ago and has 5 years to maturity. What is the
value of the bond assuming 14 percent rate of interest?

Zhen Yi
Par Value 1000
Coupon Int 12%
Payment (120/2) 60
Year (5*2) 10
RR 7%
PV ($929.76)

56) What is the current price of a $1,000 par value bond maturing in 12 years with a coupon rate of 14
percent, paid semiannually, that has a YTM of 13 percent?

Answer :

Par Value 1000


Coupon Int 14%
Payment (140/2) 70
Year (12*2) 24
RR 6.50%

PV ($1,059.95)

57) Nico Corp issued bonds bearing a coupon rate of 12 percent, pay coupons semiannually, have 3 years
remaining to maturity, and are currently priced at $940 per bond. What is the yield to maturity?

Nico Corp
Par Value 1000
Coupon Int 12%
Payment 60
Year 6
PV -940

IRR 14.54%

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