Problem 7-1 Bond valuation Callaghan Motors\' bonds have 8 years remaining to ma
ID: 2649352 • Letter: P
Question
Problem 7-1
Bond valuation
Callaghan Motors' bonds have 8 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 9%, and the yield to maturity is 12%. What is the bond's current market price?
Problem 7-2
A bond has a $1,000 par value, 20 years to maturity, and a 8% annual coupon and sells for $1,110.
What is its yield to maturity (YTM)? Round your answer to two decimal places.
%
Assume that the yield to maturity remains constant for the next 5 years. What will the price be 5 years from today? Round your answer to the nearest cent.
7-3
Nungesser Corporation's outstanding bonds have a $1,000 par value, a 10% semiannual coupon, 11 years to maturity, and an 7% YTM. What is the bond's price? Round your answer to the nearest cent.
Problem 7-4
Yield to maturity
A firm's bonds have a maturity of 14 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 7 years at $1,239, and currently sell at a price of $1,409.57.
What is their nominal yield to maturity? Round your answer to two decimal places.
%
What is their nominal yield to call? Round your answer to two decimal places.
%
Explanation / Answer
Problem 7-1
Bond valuation
Callaghan Motors' bonds have 8 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 9%, and the yield to maturity is 12%. What is the bond's current market price?
Bond Value = pv(rate, nper,pmt,fv)
Nper (indicates the period) = 8
PV (indicates the price) = ?
PMT (indicate the annual payment) = 1000*9% = 90
FV (indicates the face value) = 1000
Rate (indicates YTM) = 12%
Bond Value = pv( 12%,8,90,1000)
Bond Value = $ 850.97