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Manal Elkhoshkhany
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Bond yields. A bond with face value $1000 has a current yield

Resolved Question:

Bond yields. A bond with face value $1000 has a current yield of 7% and a coupon rate of 8%. What is the bond price?
Submitted: 8 years ago.
Category: Finance
Expert:  Manal Elkhoshkhany replied 8 years ago.

Hello

 

Please note that there is something missing in your question. How many years to maturity does the bond have?

 

Regards,

Customer: replied 8 years ago.
The question doesn't offer any more information
Expert:  Manal Elkhoshkhany replied 8 years ago.

Hello again

 

You cannot calculate the price f the bond without knowing the years to maturity so if the question does not offer more information, then this is a mistake. Please double check with your instructor.

 

Which textbook are you using: Title, author's name, and edition?

 

Regards,

Customer: replied 8 years ago.

Fundamentals of Corporate Finance 5th ed.

Brealey, Myers, Marcus. 2007

The MCGraw-Hill Companies

There is another question after this one,

Bond Pricing. A 6-year circular file bond pays interest of $80 annually and sells for $950. What are its coupon rate , current yield and yield to maturity?

Customer: replied 8 years ago.
Can you help me on this one?
Expert:  Manal Elkhoshkhany replied 8 years ago.

I can yes, I am checking if I have your book. Let me first check the first question

 

Regards,

Customer: replied 8 years ago.
Thank you
Expert:  Manal Elkhoshkhany replied 8 years ago.

Ok :) My mistake, I misread the first question.Embarassed

 

To make up for my mistake, I will answer both questions for the price of one.

 

Please click here for the solutions

 

Regards,

 

P.S. If you like my work, please feel free to address your future posts to me secifically by typing "For BusinessTutor" at the beginning of your post

 

Please leave feedback

Manal Elkhoshkhany and other Finance Specialists are ready to help you
Customer: replied 8 years ago.

If you are up for it I have one more question

Bond Prices and yields. Several years ago, Castles in the Sand, Inc. issued bonds at face value at a yield to maturity of 7% Now with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15 percent. What has happened to the price of the bond?

Suppose that investors believe that Castles can make good on the promised coupon payments, but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 80 percent of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive?

Customer: replied 8 years ago.
Was that a yes or no on this one? It is late and I would like to know if I should stay up for an answer or give up for the night :)
Expert:  Manal Elkhoshkhany replied 8 years ago.

I am sorry I was working on another assignment. Smile

 

I can hep with this one, but for future questions, please post each question as a separate post so that there is no confusion about which questions were answered and which were not. Just give me 15 minutes max and I will post the solution.

 

Regards,

Customer: replied 8 years ago.

I will do that

thanks

 

Expert:  Manal Elkhoshkhany replied 8 years ago.

You are welcome Smile

 

Please click here for the word file

 

Please click here for the excel sheet

 

P.S. I have answered the question in excel as well so that you have the two methods (The formula in word, and the excel built-in formulae)

 

Regards,

Manal Elkhoshkhany and other Finance Specialists are ready to help you