Explore BrainMass
Share

# Calculating Current Price and YTM

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

1). CR Inc. has 7% coupon bonds with 10 years to maturity. The bond requires annual coupon payments. The face value is \$1,000.

Calculate the current price of the bond if the yield to maturity is 9%. (work this problem using Excel spread sheet also)

2). Neuralware Company has issued 12% coupon bonds with \$1,000 face value. The bond pays semi-annual coupon payments. It has 5 years to maturity. If the bonds are selling for \$1,100, calculate the yield to maturity of the bonds.

Please show all calculations by hand as well as show how they could be calculated using excel.

#### Solution Preview

Please refer attached MS Excel file for calculations carried out with the help of MS Excel.

Solution:

1). CR Inc. has 7% coupon bonds with 10 years to maturity. The bond requires annual coupon payments. The face value is \$1,000.

Calculate the current price of the bond if the yield to maturity is 9%. (work this problem using Excel spread sheet also)

Number of coupon payments=n=10
Coupon payment=C=1000*7%=\$70
Price of bond=?
Maturity amount=Face value=\$1000
Discount rate=YTM=r=9%
Price of bond= C/r(1-1/(1+r)^n)+M/(1+r)^n
...

#### Solution Summary

Solutions depict the methodology to calculate current price and YTM.

\$2.19

## Bond: Calculate current price, yield, YTM, call

A bond has the following terms:

Annual interest \$100
Term 15 years
Principal \$1,000

a. What is the current price of the bond if comparable yields are 7 percent?
b. What are the current yield and yield to maturity given the price of the bond in the previous question?
c. If you expect the bond to be called at the end of the year, what would be the maximum price you should pay for the bond?
d. Is there a reason to expect that the bond will be called?

View Full Posting Details