nommies005
26.06.2020 •
Business
A firm's bonds have a maturity of 14 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 7 years at $1,073.00, and currently sell at a price of $1,135.93. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places.
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Ответ:
YTM = 6.51%
YTC = 6.40%
Explanation:
We need to solve using excel goal seek or bond formulas to generate the yield (interest rate) which matches the future couponb and maturity payment with the current selling price of the bond:
Present value of the coupon
C40.000 (1,000 x 8% / 2 payment per year)
time28 (14 years x 2 payment per year)
rate0.032529972 (generate using goal seek tool)
PV$727.8688
Pv of the maturity (lump sum)
Maturity 1,000.00
time 28.00
rate 0.032529972
PV 408.06
PV c$727.8688
PV m $408.0612
Total$1,135.9300
As this is a semiannual rate we multiply it by 2
0.032529972 x 2 = 0.065059944 = 6.51%
We repeat the procedure with changing the time and end-value to adjust for the callabe conditions:
C40.000
time14 (7 years x 2 payment per year)
rate0.032015131
PV$445.6984
Maturity 1,073.00 (call price)
time 14.00
rate 0.032015131
PV 690.23
PV c$445.6984
PV m $690.2316
Total$1,135.9300
Againg his will be a semiannual rate so we multiply by two:
0.032015131 x 2 = 0.064030263 = 6.40%
Ответ:
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Explanation: