Question: PLEASE HELP, I HAVE BEEN STUCK ON THIS ONE FOR OVER A WEEK. PLEASE ANSWER BY FILLING IN THE EXCEL SPREADSHEET IN THE PICTURES BELOW.

PLEASE HELP, I HAVE BEEN STUCK ON THIS ONE FOR OVER A WEEK. PLEASE ANSWER BY FILLING IN THE EXCEL SPREADSHEET IN THE PICTURES BELOW. THANK YOU IN ADVANCE

PLEASE HELP, I HAVE BEEN STUCK ON THIS ONE FOR OVER A

WEEK. PLEASE ANSWER BY FILLING IN THE EXCEL SPREADSHEET IN THE PICTURES

BELOW. THANK YOU IN ADVANCE 4) Build a Model: Bond Valuation Start

with the partial model in the file Chou_P24_Build a Model.xlsx on the

4) Build a Model: Bond Valuation Start with the partial model in the file Chou_P24_Build a Model.xlsx on the textbooks Web site. A 20-year, 8\% semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040. The bond sells for $1,100. (Assume that the bond has just been issued.) a. What is the bond's yield to maturity? b. What is the bond's current yield? c. What is the bond's capital gain or loss yield? d. What is the bond's yield to call? e. How would the price of the bond be affected by a change in the going market interest rate? (Hint: Conduct a sensitivity analysis of price to changes in the going market interest rate for the bond. Assume that the bond will be called if and only if the going rate of interest falls below the coupon rate. This is an oversimplification, but assume it for purposes of this problem.) f. Now assume the date is 0ctober 25, 2020. Assume further that a 12%, 10 -year bond was issued on July 1, 2020, pays interest semiannually (on January 1 and July 1), and sells for $1,100. Use your spreadsheet to find the bond's yield. A 20-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040. The bond sells for $1,100. (Assume that the bond has just been issued.) \begin{tabular}{|l|r|} \hline Basic Input Data: & \\ Years to maturity: & 20 \\ Periods per year: & 2 \\ \hline Periods to maturity: & \\ \hline Coupon rate: & 8% \\ \hline Par value: & $1,000 \\ Periodic payment: & \\ Current price & $1,100 \\ Call price: & $1,040 \\ Years till callable: & 5 \\ \hline Periods till callable: & \\ \hline \end{tabular} a. What is the bond's yield to maturity? PeridodicYTMAnnualizedNominalYTM==Hint:Thisisanominalrate,nottheeffectiverate.Nominalratesaregenerallyquoted. b. What is the bond's current yield? Current yield = Hint: Write formula in words. Current yield = Hint: Cell formulas should refer to Input Section Current yield = (Answer) c. What is the bond's capital gain or loss yield? Cap. Gain/loss yield = Hint: Write formula in words. Cap. Gain/loss yield = Hint: Cell formulas should refer to Input Section Cap. Gain/loss yield = (Answer) Note that this is an economic loss, not a loss for tax purposes. d. What is the bond's yield to call? Here we can again use the Rate function, but with data related to the call. PeridodicYTC=AnnualizedNominalYTC= This is a nominal rate, not the effective rate. Nominal rates are generally quoted. The YTC is lower than the YTM because if the bond is called, the buyer will lose the difference between the call price and the current price in just 4 years, and that loss will offset much of the interest imcome. Note too that the bond is likely to be called and replaced, hence that the YTC will probably be earned

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