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    Bonds from AT&T, Dell, and IBM

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

    (see the attached file)

    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? Please submit your tutorial in Excel or other supporting documentation showing how the answers were reached.

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    Solution Summary

    The ranking is based on the difference between the value of the bond to me based on my required rate of return and the bond's current market price. This solution is calculated in the attached Excel file.

    $2.19

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