Calculate: Bond Yields and Pricing
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Please answer the following questions about bond yields and pricing.
1. A bond with a face value of $1,000 has a current yield of 7 percent and a coupon rate of 8 percent. What is the bond's price?
2. A 6-year Circular File bond pays interest of $80 annually and sells for $950. What are its coupon rate current yield and yield to maturity?
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Solution Summary
This solution is comprised of a very detailed, step by step response illustrating how to solve for both the price of a bond and the yield of a bond currently and to maturity. All calculations are provided.
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1. A bond with face value $1,000 has a current yield of 7 percent and a coupon rate of 8 percent. What is the bond's price?
Current yield = Annual interest / Price
Annual interest = Coupon rate x Face Value = 8% x $1000 = $80.00
Current yield = 7%
Therefore price = Annual interest / Current yield = $80/7% = $1,142.86
2. A 6-year Circular File bond pays interest of $80 annually and sells for $950. What ...
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