Quantitative Problem: Potter Industries has a bond issue outstanding with an ann
ID: 2647097 • Letter: Q
Question
Quantitative Problem: Potter Industries has a bond issue outstanding with an annual coupon of 6% and a 10-year maturity. The par value of the bond is $1,000. If the going annual interest rate is 7.8%, what is the value of the bond? Round your answer to the nearest cent. Do not round intermediate calculations.
$
Quantitative Problem: Potter Industries has a bond issue outstanding with a 6% coupon rate with semiannual payments of $30, and a 10-year maturity. The par value of the bond is $1,000. If the going annual interest rate is 7.8%, what is the value of the bond? Round your answer to the nearest cent. Do not round intermediate calculations.
$
7B
Quantitative Problem: Ace Products has a bond issue outstanding with 15 years remaining to maturity, a coupon rate of 7.2% with semiannual payments of $36, and a par value of $1,000. The price of each bond in the issue is $1,170.00. The bond issue is callable in 5 years at a call price of $1,072.
What is the bond's current yield? Round your answer to two decimal places. Do not round intermediate calculations.
%
What is the bond's nominal annual yield to maturity (YTM)? Round your answer to two decimal places. Do not round intermediate calculations.
%
What is the bond's nominal annual yield to call (YTC)? Round your answer to two decimal places. Do not round intermediate calculations.
%
Explanation / Answer
Quantitative Problem: Potter Industries has a bond issue outstanding with an annual coupon of 6% and a 10-year maturity. The par value of the bond is $1,000. If the going annual interest rate is 7.8%, what is the value of the bond? Round your answer to the nearest cent. Do not round intermediate calculations.
Bond Value = pv(rate, nper,pmt,fv)
Nper (indicates the period) = 10
PV (indicates the price) = ?
PMT (indicate the annual payment) = 1000*6% = 60
FV (indicates the face value) = 1000
Rate (indicates YTM) = 7.8%
Bond Value = pv( 7.8%,10,60,1000)
Bond Value = $ 878.12
Quantitative Problem: Potter Industries has a bond issue outstanding with a 6% coupon rate with semiannual payments of $30, and a 10-year maturity. The par value of the bond is $1,000. If the going annual interest rate is 7.8%, what is the value of the bond? Round your answer to the nearest cent. Do not round intermediate calculations.
Bond Value = pv(rate, nper,pmt,fv)
Nper (indicates the period) = 10*2 = 20
PV (indicates the price) = ?
PMT (indicate the semi annual payment) = 1000*6% *1/2= 30
FV (indicates the face value) = 1000
Rate (indicates YTM) = 7.8%*1/2 = 3.9%
Bond Value = pv( 3.9%,20,30,1000)
Bond Value = $ 876.60
Quantitative Problem: Ace Products has a bond issue outstanding with 15 years remaining to maturity, a coupon rate of 7.2% with semiannual payments of $36, and a par value of $1,000. The price of each bond in the issue is $1,170.00. The bond issue is callable in 5 years at a call price of $1,072.
What is the bond's current yield? Round your answer to two decimal places. Do not round intermediate calculations.
Bond's current yield = 36/1170 * 2
Bond's current yield = 6.15%
What is the bond's nominal annual yield to maturity (YTM)? Round your answer to two decimal places. Do not round intermediate calculations.
Bond's nominal annual yield to maturity (YTM) = rate(nper,pmt,pv,fv)*2
Nper (indicates the period) = 15*2 = 30
PV (indicates the price) = 1170
PMT (indicate the semi annual payment) = 36
FV (indicates the face value) = 1000
Rate (indicates YTM) = ?
Bond's nominal annual yield to maturity (YTM) = rate(30,36,-1170,1000)*2
Bond's nominal annual yield to maturity (YTM) = 5.52%
What is the bond's nominal annual yield to call (YTC)? Round your answer to two decimal places. Do not round intermediate calculations.
Bond's nominal annual yield to call (YTC) = rate(nper,pmt,pv,fv)*2
Nper (indicates the period) = 5*2 = 10
PV (indicates the price) = 1170
PMT (indicate the semi annual payment) = 36
FV (indicates the call value) = 1072
Rate (indicates YTM) = ?
Bond's nominal annual yield to call (YTC)= rate(10,36,-1170,1072)*2
Bond's nominal annual yield to call (YTC) = 4.65%