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1 page/≈275 words
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Level:
MLA
Subject:
Accounting, Finance, SPSS
Type:
Coursework
Language:
English (U.S.)
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Topic:

Corporate Finance - Bonds Yields H.W (Coursework Sample)

Instructions:
Please find the attachment, you may use this book for help (Chapter 6) Ross, Stephen A, Westerfield, Randolph W., and Jordan, Bradford F., Essentials of Corporate Finance, 7th edition, McGraw-Hill Irwin, 2008 ISBN 978-0-07-338246-3 source..
Content:
Answer 19
The coupon rate is 8.5%, and the duration to maturity is 20 years. In the situation where new bonds are to be issued, the yield can be calculated to be $1062 using the formula:
P=current price+par value2
This will then be equated to $42.5 multiplied by the present value annuity factor, with an unknown coupon rate and 40 periods, added to par value of the bond multiplied by the present value factor for 40 periods with an unknown rate.
Using a spreadsheet and setting the equation, it can be found that the rate is 3.94% this is the semiannual rate therefore to get the YTM we will have to multiply it by 2 to give 7.88%.
A...
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