Redesigned Computers has 6.5 percent coupon bonds outstanding with a current market price of $548. The yield to maturity is 13.2
percent and the face value is $1,000. Interest is paid annually. How many years is it until these bonds mature?A. 5.73 yearsB. 7.41 yearsC. 6.16 yearsD. 4.19 years
1 answer:
Answer:
17.84 years
Explanation:
For this question, we use the NPER function that is presented on the excel spreadsheet. Kindly find the attachment below:
Given that,
Present value = $548
Future value = $1,000
Rate of interest = 13.20%
PMT = $1,000 × 6.5% = $65
The formula is shown below:
= NPER(Rate,PMT,-PV,FV,type)
The present value come in negative
So, after solving this, the number of years until these bonds mature is 17.84 years
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Answer:
YTM = 6.51%
YTC = 6.40%
Explanation:
We need to solve using excel goal seek or bond formulas to generate the yield (interest rate) which matches the future couponb and maturity payment with the current selling price of the bond:
Present value of the coupon
C 40.000 (1,000 x 8% / 2 payment per year)
time 28 (14 years x 2 payment per year)
rate 0.032529972 (generate using goal seek tool)
PV $727.8688
Pv of the maturity (lump sum)
Maturity 1,000.00
time 28.00
rate 0.032529972
PV 408.06
PV c $727.8688
PV m $408.0612
Total $1,135.9300
As this is a semiannual rate we multiply it by 2
0.032529972 x 2 = 0.065059944 = 6.51%
We repeat the procedure with changing the time and end-value to adjust for the callabe conditions:
C 40.000
time 14 (7 years x 2 payment per year)
rate 0.032015131
PV $445.6984
Maturity 1,073.00 (call price)
time 14.00
rate 0.032015131
PV 690.23
PV c $445.6984
PV m $690.2316
Total $1,135.9300
Againg his will be a semiannual rate so we multiply by two:
0.032015131 x 2 = 0.064030263 = 6.40%
Answer:
11.00
Explanation:
36,000 net income
200,000 common stock / $4 per share= 50,000 shares
36,000 / 50,000 = 0.72 earnings per share
7.92 / 0.72 = 11