Wine and Roses, Inc., offers a bond with a coupon of 7.5 percent with semiannual payments and a yield to maturity of 8.16 percent. The bonds mature in 10 years. What is the market price of a $1,000 face value bond?

Wine and Roses, Inc., offers a bond with a coupon of 7.5 percent with semiannual payments and a yield to maturity of 8.16 percent. The bonds mature in 10 years. What is the market price of a $1,000 face value bond?
 

$1,449.42

$955.47

$1,461.51

$1,506.05

$1,055.32 

Explanation

PV=[(0.075×$1,000)/2]×1−(1/[1+(0.0816/2)]2×10)0.0816/2+$1,000/[1+(0.0816/2)]2×10=$506.05+$449.42=$955.47PV=[(0.075×$1,000)/2]×1−(1/[1+(0.0816/2)]2×10)0.0816/2+$1,000/[1+(0.0816/2)]2×10=$506.05+$449.42=$955.47
 

Enter

10 × 2

8.16%/2

$37.50

$1,000

N

I/Y

PV

PMT

FV

Solve for

$955.47

Broke Benjamin Co. has a bond outstanding that makes semiannual payments with a coupon rate of 6.4 percent. The bond sells for $1,066.57 and matures in 22 years. The par value is $1,000. What is the YTM of the bond?

Multiple Choice

Top of Form

2.93%

5.27%

4.39%

5.86%

Correct

5.56%

Bottom of Form

Explanation

$1,066.57 = $32.00{[1 − 1/(1 + r)⁴⁴]/r} + $1,000/(1 + r)⁴⁴
r = .0293, or 2.93%

YTM = 2.93% × 2 = 5.86%
 

Enter

22 × 2

−$1,066.57

$32.00

$1,000

N

I/Y

PV

PMT

FV

Solve for

2.93%