Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Do not include the percent sign (%). Round your answers to 2 decimal places, e.g. 32.16.)

Average Treasury bill return_______ percent

Average inflation_______percent

Requirement 2:

Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not include the percent sign (%). Round your answers to 2 decimal places, e.g. 32.16.)

Standard deviation T-bills_______ percent

Inflation_______ percent

Requirement 3:

Calculate the average real return for Treasury bills over this period. (Negative amount should be indicated by a minus sign. Do not include the percent sign (%). Round your answers to 2 decimal places, e.g. 32.16.)

Average real return _____ percent

Question 2: Valuing Bonds

The Mangold Corporation has two different bonds currently outstanding:

Bond M has a face value of $14,000 and matures in 21 years. The bond makes no payments for the first 8 years, then pays $700 every six months over the subsequent 5 years, and finally pays $800 every six months over the last 8 years.

Bond N also has a face value of $14,000 and a maturity of 21 years; it makes no coupon payments over the life of the bond. If the required return on these bonds is 11 percent compounded semiannually, the current price of Bonds M and N is $ and $ , respectively. (Round your answers to 2 decimal places, e.g. 32.16.)

Solution Summary

Answers questions on average return, standard deviation of return, average real return for treasury bills and valuation of bonds.

A $1,000 par value bond pays $50 in interest every six months. What will be the value of the bond if it matures in 30 months and the yield-to-maturity of similar risk bonds is 8%?

Why is stock valuation considerably less precise than bondvaluation? Can you give at least two reasons. Would it be possible to provide some industry references?
Thank you.

A1. (Bondvaluation) A $1,000 face value bond has a remaining maturity of 10 years and a
required return of 9%. The bond's coupon rate is 7.4%. What is the fair value of this bond?
A10. (Dividend discount model) Assume RHM is expected to pay a total cash dividend of $5.60
next year and its dividends are expected to grow at

A1. (Bondvaluation) A $1,000 face value bond has a remaining maturity of 10 years and a
required return of 9%. The bond's coupon rate is 7.4%. What is the fair value of this bond?
A5. (Yield to maturity) New Jersey Lighting has a 7% coupon bond maturing in 17 years. The
current market price of the bond is $975. What is the

Quinn Electric Company has outstanding a bond issue that will mature to its $1,000 par value in 12 years. The bond has a coupon rate of 15% and pays the interest annually.
a) Find the value of the bond if the required return is (1) 10 percent, (2) 15 percent and (3) 17 percent.
b) Use your findings in part a) to discuss the

BondValuation
a. Calculate the Yield-to-Maturity on a 8 year, 9 percent semi-annual coupon, $1,000 par value bond that sells for $921.11 What is the YTM if that bond now sells for $1,157.67?
b. What is the total return, the current yield, and capital gains yield for the DISCOUNT bond (i.e. $921.11)? (Assume the bond is h

What would you be willing to pay for a $1,000 bond paying $70 interest at the end of each year and maturing in 25 years if you wanted the bond to yield the following rates of return?
a. 5 percent
b. 7 percent
c. 12 percent
(Note: At maturity, the bond will be retired and the holder will receive $1,000 in cash. Bonds are ty

Lets assume 6-years ago, a company issued 20-yr bonds with a 14% annual coupon rate at their $1,000 par value. The bonds had a 9% call premium, with 5 years of call protection. Today, the company calls the bonds. How do I calculate the realized rate of return for an investor who purchased the bonds when they were issued and held