Compute the current yield on both bonds

Assignment Help Financial Management

Reference no: EM131531100

An investor must choose between two bonds:

Bond A pays $95 annual interest and has a market value of $860. It has 0.1051 years to maturity.

Bond B pays $83 annual interest and has a market value of $790. It has five years to maturity.

Assume the par value of the bonds is $1,000.

a. Compute the current yield on both bonds. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

b. Which bond should she select based on your answers to part a?

c. A drawback of current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond A is 11.76 percent. What is the approximate yield to maturity on Bond B? The exact yield to maturity? (Use the approximation formula to compute the approximate yield to maturity and use the calculator method to compute the exact yield to maturity. Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

d. Has your answer changed between parts b and c of this question in terms of which bond to select?

Reference no: EM131531100

Questions Cloud

Purpose of the installed smoke management system : The property owner asks you what the firefighters smoke control station (FSCS) is, and what is the purpose of the installed smoke management system?

Explain what the given fragment of c code does : Explain what the following fragment of C code does.

Compute pittmans break-even point in sales dollars : Compute Pittman's break-even point in sales dollars for next year assuming that the agents commission rate remains unchanged at 15 percent.

Explain how the c compiler handles memory allocation : The following two fragments of code are a C program and the 68000 assembly language output produced by Intermetrics cross-compiler.

Compute the current yield on both bonds : Compute the current yield on both bonds. Which bond should she select based on your answers to part a?

Explain the role of research in marketing : Write a paper in which you explain the role of research in marketing.List at least one specific strategy for price, product used by your company.

Compute the discount rate and present value of total inflows : Compute the discount rate. Calculate the present value of total inflows. Calculate the present value of total outflows.

Where do you think the aviation industry will go in future : Where do you think the aviation industry will go in the future, in particular in regard to Air Traffic Control. Discuss any factors that may affect development.

Create an argumentative essay : Every person living in the United States should be required to serve four years in the military immediately following high school graduation

User Account

All Pages