Computation of issue price return and market price on bonds

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Reference no: EM1314485

Consider the Allied Signal Corporation zero coupon money multiplier notes of 2008. The bonds were issued on July 1, 1990, for $100. Interest is paid every July 1 and the bond matures July 1, 2008. Determined the yield to maturity if the bonds are purchased at the:

a.) issues price in 1990
b.) Market price as of July 1, 2004, of $750
c.) Explain why the returns calculated in (a) and (b) are different.

If you purchase a zero coupon bond today for $225 and it matures at $1000 in 11 years, what rate of return will you earn on that bond (to the nearest 10th of the 1%)?

AT&T Corporation has several issues of bonds outstanding. One of the outstanding bonds has a 5 1/8% coupon and matures in 2004. The bonds mature on April 1 in the maturity year. Suppose an investor bought this bond on April 1, 1999, and assume interest is paid annually on April 1. Calculate the yield to maturity assuming the investor buys the bond at the following price, as quoted in the financial press:

a.) 100
b.) 90
c.) 105

Reference no: EM1314485

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