A 15 yrs 7% coupon bond (sa), par value $1000 is selling at $1050. Let us suppose the investor needs to sell the bond after 10 yrs at YTM of 4%. Calculate the total return of your investment and the annual return.

A 30 yrs bond issued 15 years ago has the following parameters:
Cpn: 4.5% SA
Current Yield: 1.5%
Par Value: $1,000
Estimate Duration: ? yrs
Convexity: 169.65
You should provide 4 different prices
-Estimation of the price given the Duration (ΔP= -D * Δi) and convexity [1/2(convexity)*( Δi)^2]
-Table Bond Price
-PV formula in excel
-Long Formula (Annuity)

Assuming the face value of TOL's bond is $1,000, determine the current price of this bond. TOL's bond is a 25-year bond issue 23 years ago with a coupon of8% maturing in 2 years and as of today is rated BBB-. It was rated BBB+ 23 years ago at issuance.
 
Recent Treasury Yields:
 
3-months           2.20%
6-months           2.30%
1-year                2.35%
2-years               2.40%
5-years               2.5%
7-years               2.70%
10-years             2.80%
30-years             3.00%

 

Transcribed Image Text:

Current Corporate Rating 1 Уг AAA AA+ AA AA- A+ A А- ВВВ+ ВВВ ВВВ- 35 41 42 44 42 66 70 82 98 150 Spreads: 2 yr 36 48 52 56 68 72 76 85 92 165 8 3 уг 42 49 56 60 70 75 80 88 95 170 5 уг 50 62 66 70 75 77 84 99 104 190 7 Yr 68 76 80 82 90 92 95 128 135 195 10 Yr 82 91 96 98 101 103 104 150 158 210 30 Yr 102 112 114 120 125 127 130 177 184 270 Current Corporate Rating 1 Уг AAA AA+ AA AA- A+ A А- ВВВ+ ВВВ ВВВ- 35 41 42 44 42 66 70 82 98 150 Spreads: 2 yr 36 48 52 56 68 72 76 85 92 165 8 3 уг 42 49 56 60 70 75 80 88 95 170 5 уг 50 62 66 70 75 77 84 99 104 190 7 Yr 68 76 80 82 90 92 95 128 135 195 10 Yr 82 91 96 98 101 103 104 150 158 210 30 Yr 102 112 114 120 125 127 130 177 184 270

Answer rating: 100% (QA)

Lets tackle each of these bond questions one at a time First we have a 15year 7 coupon bond with a par value of 1000 that is selling at 1050 The investor needs to sell the bond after 10 years at a yie... View the full answer