Computation of ytm if the bonds are purchased at issue price

Reference no: EM1310725

Computation of YTM if the bonds are purchased at Issue price & Market price and analyzing the difference.

a. 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 on July 1, 2008. Determine the yield to maturity if the bonds are purchased at the:
a. Issue 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.

b. The following bond quotations are taken from the Wall Street Journal dated Friday, September 5, 2003:

Company	Coupon	Maturity	Last Price	Yield
International Paper (IP)	6.75	01- Sep- 2011	108.2	5.468
Sara Lee (SLE)	3.875	15-Jun-2013	89.7	5.235
Wells Fargo (WFC)	7.25	24-Aug-05	101.2	6.952
General Motors (GM)	7.125	15-Jul-13	109.65	2.191
Lincoln National (LNC)	6.2	15-Dec-11	105.9	5.307

a) Explain why the International Paper bond is selling at a premium but the Sara Lee is selling at a discount.

b) Why is the yield (yield to maturity) on the General Motors bond so much higher than the yield on the Sara Lee bond?

c) Why is the yield (yield to maturity) on the Wells Fargo Bank bond so much less than the yield on the Lincoln National Corp. bond?

Reference no: EM1310725

Questions Cloud

Computation of yield to maturity when interest is paid : Computation of yield to maturity when interest is paid and compounded annually and bond's rate of return earned

Computing payment for sales : Suppose each month has thirty days and AmDocs has a sixty-day accounts receivable period. In the second calendar quarter of year (April, May and June), AmDocs will gather payment for sales it made during which of the months listed below?

Generating a class known as point : Generate a class known as Point which has following private members: Float x - x-coordinate of point,,Float y - y-coordinate of point.

Mental states of sergio and giuseppe : What feature of consciousness explains the different mental states of Sergio and Giuseppe?

Computation of ytm if the bonds are purchased at issue price : Computation of YTM if the bonds are purchased at Issue price & Market price and analyzing the difference

Best fit milos symptoms : Which diagnosis presently seems to best fit Milo’s symptoms?

Evaluate the marginal cost per chair to xy : Evaluate the marginal cost per chair to XY of accepting the chair order from ABC? and What assumptions were made in calculating the marginal cost?

Computing wal-mart-s original strategy for creating value : Wal-Mart, discount merchandiser, started by putting large stores in small Sunbelt towns that its competitors had neglected. Compute Wal-Mart's original strategy for creating value?

Social integration and its definition : You would require to describe the rational for needing this kind of group, a brief literature regarding social integration, statistics on social integration and its definition.

User Account

All Pages