Bond Calculations: 1) Avon Products Note 06.5% Coupon: 6.500% Maturity 5 years Rating: Moodys: BAA3 Price: $108.093 Calculate: Y
ield to maturity S&P: BBB- 2) SAFEWAY INC SR NT 5.00000% Coupon: 5.000% Maturity: 5 years Rating: Moodys'BAA3 Price: $101.180 S&P: BBB a) Calculate: Yield to maturity b) Suppose the bond is callable in 3 years at $ 110. Using the price above find the yield to call Hint: use the FV to be $110 instead of $ 100. And the time to maturity 3 years instead of 5 years
1 answer:
Answer:
Answer for the question:
Bond Calculations: 1) Avon Products Note 06.5% Coupon: 6.500% Maturity 5 years Rating: Moodys: BAA3 Price: $108.093 Calculate: Yield to maturity S&P: BBB- 2) SAFEWAY INC SR NT 5.00000% Coupon: 5.000% Maturity: 5 years Rating: Moodys'BAA3 Price: $101.180 S&P: BBB a) Calculate: Yield to maturity b) Suppose the bond is callable in 3 years at $ 110. Using the price above find the yield to call Hint: use the FV to be $110 instead of $ 100. And the time to maturity 3 years instead of 5 years
Is given in the attachment.
Explanation:
You might be interested in
Answer:
The price of the bond is $1000. Thus, option a is the correct answer.
Explanation:
The price of a bond is calculated using the present value of the interest payments made by the bond, which is in the form of an annuity, plus the present value of the face value of the bond. The present value is calculated by discounting the annuity of interest and the face value by the YTM or yield to maturity. In case YTM is not provided, we assume that it is same as or equal to the coupon rate paid by the bond.
The formula for the price of the bond is attached.
Bond Price = 25 * [(1 - (1+0.025)^-8) / 0.025] + 1000 / (1+0.025)^8
Bond Price = $1000
