• 100% Satisfaction Guarantee
Neo, Tutor
Category: Homework
Satisfied Customers: 12101
Experience:  BS Accounting
4224391
Neo is online now

# Bond Prices Brittany Co. issued 15-year bonds one year

Bond Prices

Brittany Co. issued 15-year bonds one year ago at a coupon rate of 8.25 percent. The bonds make semiannual payments. If the YTM on these bonds is 8.5 percent, the current bond price is \$____________. (Round your answer to 2 decimal places. Omit the "\$" sign in your response.)

Inflation and Nominal Returns

Suppose the real rate is 6 percent and the inflation rate is 1.8 percent. You would expect to see a rate of ____________ percent on a Treasury bill. (Input answer as a percent rounded to 2 decimal places, without the percent sign.)

Bond Yields

The Timberlake-Jackson Wardrobe Co. has 10 percent coupon bonds on the market with 17 years left to maturity. The bonds make annual payments. If the bond currently sells for \$1,025.35, the YTM is ____________ percent. (Input answer as a percent rounded to 2 decimal places, without the percent sign.)
Good day!

1. Current Bond Price = \$979.03

2. Risk Free Rate = 7.80%

3. Yield To Maturity = 9.69%

I hope this helps.

Thank you so much! :)
Customer: replied 7 years ago.

Thank YOu, XXXXX XXXXX will acept yr answer, but number2 is wrong. 7.80 is marked wrong on my assigment, Can you please let e know what you rounded too or the formula you used? Thanks!!!

The formula I used is Risk Free Rate = Real Rate + Inflation Premium
= 6% +1.8% = 7.8%
Customer: replied 7 years ago.
The formula I have is (1+R)=(1+r)(1+h) , do you have any alternative to the answer other than 7.80% ...??
If this is the case, then, please try:

(1 + 0.06) / (1 + 0.018) - 1 = r
r = 4.13%
Customer: replied 7 years ago.

THanks for trying, but that answer still shows wrong. when i submitted it. If you have any other ideas let me know..otherwise thanks for trying!