| Fin 306 | Dr. Rhoda | |||||
| Bond Worksheet | ||||||
| Determine the prices of each of the following bonds | ||||||
| Assume annual compounding and a $1000 face value | ||||||
| Annual | Matur | Annual | ||||
| Bond | Coupon | (years) | YTM | Answer | ||
| 1 | 4.00% | 10 | 6.00% | $852.80 | ||
| 2 | 8.50% | 5 | 12.00% | $873.83 | ||
| 3 | 9.00% | 1,000 | 10.00% | $900.00 | ||
| 4 | 10.75% | 12 | 8.30% | $1,181.80 | ||
| 5 | 0.00% | 15 | 7.60% | $333.29 | ||
| Assume semiannual compounding | ||||||
| 1 | 10.00% | 18 | 13.50% | $765.43 | ||
| 2 | 5.50% | 6 | 7.00% | $927.52 | ||
| 3 | 8.25% | 23 | 8.25% | $1,000.00 | ||
| 4 | 10.75% | 12 | 8.30% | $1,183.94 | ||
| 5 | 9.00% | 16 | 11.60% | $812.76 | ||
| Assume annual compounding and the listed face values | ||||||
| Face | Annual | Matur | Annual | Answer | ||
| (Mill. $) | Coupon | (years) | YTM | (Mill. $) | ||
| 55 | 10.00% | 20 | 8.40% | $63,388,732 | ||
| 200 | 8.00% | 7 | 12.00% | $163,489,948 | ||
| 46.7 | 10.00% | 10 | 11.00% | $43,949,729 | ||
| 10 | 5.00% | 11 | 15.00% | $4,766,288 | ||
| 0.1 | 2.25% | 12 | 10.00% | $47,194 | ||
| Calculate the Terminal Values of the following bonds | ||||||
| Assume annual compounding and a $1000 face | ||||||
| Annual | Matur | Annual | Holding | |||
| Coupon | (years) | YTM | Period | Answer | ||
| 10.00% | 11 | 9.00% | 11 | $2,756 | ||
| 7.50% | 22 | 10.00% | 15 | $3,261 | ||
| 4.00% | 3 | 5.40% | 3 | $1,127 | ||
| 0.00% | 16 | 10.00% | 16 | $1,000 | ||
| 0.00% | 13 | 12.50% | 8 | $555 | ||
| Assume the Reinvestment Rate changes to the level indicated | ||||||
| immediately after the bond is purchased | ||||||
| Calculate the new terminal values that result | ||||||
| Annual | Matur | Original | New | Holding | ||
| Coupon | (years) | YTM | Rate | Period | Answer | |
| 10.00% | 11 | 9.00% | 7.00% | 11 | $2,578 | |
| 7.50% | 22 | 10.00% | 15.00% | 15 | $4,256 | |
| 4.00% | 3 | 5.40% | 7.90% | 3 | $1,130 | |
| 0.00% | 16 | 10.00% | 15.00% | 16 | $1,000 | |
| 0.00% | 13 | 12.50% | 1.00% | 8 | $951 | |
| Calculate the annual realized rate of return for the 5 bonds | ||||||
| listed directly above at both the original YTM and the new Rate | ||||||
| Original | Realiz. | New | Realiz. | |||
| YTM | Rate | Rate | Rate | |||
| 9.00% | 9.00% | 7.00% | 8.34% | |||
| 10.00% | 10.00% | 15.00% | 11.97% | |||
| 5.40% | 5.40% | 7.90% | 5.50% | |||
| 10.00% | 10.00% | 15.00% | 10.00% | |||
| 12.50% | 12.50% | 1.00% | 20.34% | |||