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Bond Prices and Yield to Maturity for Coupon Rates

5.17 bond sold for \$1,065.12. the bond life is 9 years, yeild to maturity is 7 percent, what is the coupon rate?

my answers 6.0

5.18
a. several years ago bonds were issued at face value yeild to maturity of 7 percent. with 8 years left until maturity company hits hard times. yield to maturity increases to 15%. what happens to bond price?
b. investors believe company can make good on payments, but will go bankrupt when bond matures and principles come due. investors will recieve 80% of face value at maturity. If bought today what yeild to maturity would they investor expect to recieve?

my answers price= \$641.01 & r= 12.87

Solution Preview

5.17 bond sold for \$1,065.12. the bond life is 9 years, yeild to maturity is 7 percent, what is the coupon rate?

my answers 6.0

We know that yield to maturity is the discounting rate that will make the present value of the interest and the principal equal to the price today. What we are given is

1,065.12 = Interest X PVIFA (9 years, 7%) + 1,000 X PVIF (9 years, 7%)

We are to find the interest amount and rest of all details are given to us.
PVIFA (9 years, 7%) = 6.515
PVIF (9 ...

Solution Summary

The solution explains the calculation of coupon rate and the YTM on bonds.

\$2.19