If the following quotes are from March 15, 2013, what was the yield to maturity
ID: 2613632 • Letter: I
Question
If the following quotes are from March 15, 2013, what was the yield to maturity for the PO.BN bonds with $1,000 face values and semiannual payments?
(Do not include the percent sign (%).Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Follow up,
If the following quotes are on September 15, 2012, what was the coupon rate for the JD.VR bonds with $1,000 face values and semiannual payments?
(Do not include the percent sign (%).Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Company(Ticker) Coupon Maturity Last
Price Last
Yield EST $ Vol
(000’s) Paul Orts (PO.BN) 10.20 Mar 15, 2020 92.368 ?? 2,860
Explanation / Answer
Given Effective Annual Coupon rate= 10.20% per annum with semi-annual payments, which is equal to 4.975% of semi-annual coupon rate and 9.95% of annual coupon rate..
Annual Coupon / Interest payment= $1000 * (1+ 4.975/100)2 - 1.0000
= $101.975
Yield to Maturity= [(101.975 + (1000-92.368)/7)] / [(1000+92.368)/2]
Thus, YTM= 0.4241% per annum ..................... ANSWER
Second question:
Current Bond Price= $124.47; Years to Maturity= 2033 - 2012= 21 years; Thus total payments= 21*2= 42
ACF= Annual Cash Flow from Bond; Last YTM= 0.074= 7.40% per annum
Thus, 124.47 = (ACF/(1+YTM)1) + (ACF/(1+YTM)2) + (ACF/(1+YTM)3) + ........... + (ACF/(1+YTM)42)
124.47= (ACF/(1+0.074)1) + (ACF/(1+0.074)2) + (ACF/(1+0.074)3) + ........... + (ACF/(1+0.074)42)
Using Iteration function in MS Excel spreadsheet, we obtain ACF= $5.82
Thus, effective annual Coupon Rate= [($5.82 + $5.82) / $1000] * 100= [$11.64 / $1000] * 100= 0.01164 * 100= 1.164% per annum
Thus, annual coupon rate= 0.5803% per annum