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    Homewor Bond

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    Ngan Nguyen Ho Kim
    This document contains 5 problems about bond valuation. Problem 1 asks about the current yield and yield to maturity for a 5-year bond priced at $950 with a $1,000 face value and 5% coupon. Problem 2 examines a 10-year bond priced at $1,050 with a $1,000 face value and 4% coupon. Problem 3 asks what price a company should sell 20-year, 6% coupon bonds at to raise $10 million. Problem 4 considers capital gains and total return on a 3-year bond sold before maturity. Problem 5 compares two bonds, one maturing in 5 years priced at $1,080 and one in 10 years at $1,020.

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    Homewor Bond

    Uploaded by

    Ngan Nguyen Ho Kim
    12 views1 page
    This document contains 5 problems about bond valuation. Problem 1 asks about the current yield and yield to maturity for a 5-year bond priced at $950 with a $1,000 face value and 5% coupon. Problem 2 examines a 10-year bond priced at $1,050 with a $1,000 face value and 4% coupon. Problem 3 asks what price a company should sell 20-year, 6% coupon bonds at to raise $10 million. Problem 4 considers capital gains and total return on a 3-year bond sold before maturity. Problem 5 compares two bonds, one maturing in 5 years priced at $1,080 and one in 10 years at $1,020.

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    This document contains 5 problems about bond valuation. Problem 1 asks about the current yield and yield to maturity for a 5-year bond priced at $950 with a $1,000 face value and 5% coupon. Problem 2 examines a 10-year bond priced at $1,050 with a $1,000 face value and 4% coupon. Problem 3 asks what price a company should sell 20-year, 6% coupon bonds at to raise $10 million. Problem 4 considers capital gains and total return on a 3-year bond sold before maturity. Problem 5 compares two bonds, one maturing in 5 years priced at $1,080 and one in 10 years at $1,020.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    12 views1 page

    Homewor Bond

    Uploaded by

    Ngan Nguyen Ho Kim
    This document contains 5 problems about bond valuation. Problem 1 asks about the current yield and yield to maturity for a 5-year bond priced at $950 with a $1,000 face value and 5% coupon. Problem 2 examines a 10-year bond priced at $1,050 with a $1,000 face value and 4% coupon. Problem 3 asks what price a company should sell 20-year, 6% coupon bonds at to raise $10 million. Problem 4 considers capital gains and total return on a 3-year bond sold before maturity. Problem 5 compares two bonds, one maturing in 5 years priced at $1,080 and one in 10 years at $1,020.

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    © All Rights Reserved
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    HOMEWORK –BOND

    Problem 1:

    A bond has a face value of $1,000, a coupon rate of 5%, and matures in 5 years. The current
    market price of the bond is $950. What is the bond's current yield? What is its yield to maturity
    (YTM)?

    Problem 2:

    You are considering buying a bond that has a face value of $1,000, a coupon rate of 4%, and
    matures in 10 years. The current market price of the bond is $1,050. What is the bond's current
    yield? What is its YTM? Should you buy the bond if your desired rate of return is 6%?

    Problem 3:

    A company is issuing a new bond with a face value of $1,000, a coupon rate of 6%, and a
    maturity of 20 years. The company wants to raise $10 million by selling the bonds. What price
    should the company sell the bonds at in order to achieve its fundraising goal?

    Problem 4:

    You own a bond that has a face value of $1,000, a coupon rate of 3%, and matures in 3 years.
    The current market price of the bond is $980. You decide to sell the bond before it matures.
    What is the capital gain or loss you realize on the sale? What is your total return on the
    investment?

    Problem 5:

    You are comparing two bonds:

    Bond A has a face value of $1,000, a coupon rate of 8%, and matures in 5 years. The current
    market price of the bond is $1,080.
    Bond B has a face value of $1,000, a coupon rate of 6%, and matures in 10 years. The current
    market price of the bond is $1,020.
    Which bond offers a higher yield to maturity? Which bond is a better investment if you are
    looking for a high current yield?

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