Explore BrainMass

Explore BrainMass

    Bond Valuation and YTM of Bonds

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    You are given the following data on bonds from AT&T, Dell, and IBM. Each bond has a par value of $1000.

    AT&T
    Dell
    IBM

    Coupon
    6.80
    6.50
    8.375%

    Maturity
    05/15/2036
    04/15/2038
    11/01/2019

    Frequency
    Semiannual
    Semiannual
    Semiannual

    Rating
    A
    A-
    A+

    Calculate the value of the bond if your required return is 5 percent on AT&T, 6.5 percent on Dell, and 8 percent on IBM.
    Determine the yield to maturity (YTM) on the bonds given the following prices.
    AT&T
    Dell
    IBM

    Price
    $1,060.00
    $1,016.57
    $1,307.78

    Based on each bond's ratings and your determination of its yield to maturity explain how you rank each bond for risk and return.
    Assume you had $10,000 to invest. How many of each bond would you have? What dollar amount of interest would each bond return on the investment for the next year? What would your percentage return be for the year, that is, your interest payments divided by the total amount invested? You must submit your backup in Excel or other supporting documentation showing how answers were reached.

    © BrainMass Inc. brainmass.com June 4, 2020, 2:40 am ad1c9bdddf
    https://brainmass.com/business/bond-valuation/bond-valuation-and-ytm-of-bonds-472997

    Solution Preview

    Dear Student, As you know, Brain Mass Experts are not allowed to provide complete, hand-in ready solutions, so I will be assisting you, but leaving some conclusions for you to make on your own.

    Foundation of Financial Management
    You are given the following data on bonds from AT&T, Dell, and IBM. Each bond has a par value of $1000.
    Coupon Maturity Frequency Rating
      AT&T 6.80% 36-05-15 Semiannual A
    Dell 6.50% 38-04-15 Semiannual A-
    IBM 8.375% 19-11-01 Semiannual A+

    Calculate the value of the bond if your required return is 5 percent on AT&T, 6.5 percent on Dell, and 8 percent on IBM.
    The Value of a bond is ...

    Solution Summary

    You are given the following data on bonds from AT&T, Dell, and IBM. Each bond has a par value of $1000.
    a. Calculate the value of the bond if your required return is 5 percent on AT&T, 6.5 percent on Dell, and 8 percent on IBM.
    b, Determine the yield to maturity (YTM) on the bonds given the following prices.
    AT&T
    Dell
    IBM
    c. Based on each bond's ratings and your determination of its yield to maturity explain how you rank each bond for risk and return.
    d. Assume you had $10,000 to invest. How many of each bond would you have? What dollar amount of interest would each bond return on the investment for the next year? What would your percentage return be for the year, that is, your interest payments divided by the total amount invested? You must submit your backup in Excel or other supporting documentation showing how answers were reached.

    $2.19

    ADVERTISEMENT