Current yield on this bond on the date of issue

Assignment Help Financial Management

Reference no: EM131340371

U.S. Treasury issued 30-year to maturity bonds with a 2.875% coupon.

The price was 99.461607 (% of par value). The bond makes semi-annual coupon payments and has a minimum face value of $100.

a. What are the coupon rate and the current yield on this bond on the date of issue?

b. Write out the equation to solve for yield to maturity for this bond on the date of issue and then solve for the yield to maturity. Do this in excel.

c. If this bond’s yield to maturity remains constant, then, in 1 year, will the bond’s price be higher, lower, or unchanged? Why? Solve for the price of the bond in this case.

Reference no: EM131340371

Questions Cloud

Bond is current yield better estimate of yield to maturity : Two bonds have 10 years to maturity. Bond A has a coupon rate of 2.45% and a price of 99.805 (% of FV). Bond B has a coupon rate of 5.90% and a price of 105.214 (% of FV). The bonds make semi-annual coupon payments. Which bond is selling at a premium..

Standard deviation of the rate of return on investment : Suppose you have a project that has a 0.4 chance of tripling your investment in a year and a 0.6 chance of doubling your investment in a year. What is the standard deviation of the rate of return on this investment?

Example of primary or secondary market transaction : How does a cost-efficient capital market help reduce the prices of goods and services? Describe the different ways in which capital can be transferred from suppliers of capital to those who are demanding capital. Is an initial public offering an exam..

Firm is operating at its optimal capital structure : Which of these will occur in a world with taxes and financial distress when a firm is operating at its optimal capital structure?

Current yield on this bond on the date of issue : U.S. Treasury issued 30-year to maturity bonds with a 2.875% coupon. The price was 99.461607 (% of par value). The bond makes semi-annual coupon payments and has a minimum face value of $100. What are the coupon rate and the current yield on this bon..

Based on your understanding of the trade-off theory : Based on your understanding of the trade-off theory, what kind of firms are likely to use more leverage?

Shortly before the delivery date-corn is selling in spot : Seth McDonald grows corn. In May, he decides to sell 3 contracts, about half of his expected crop, for December delivery. The contract price is $3.65 per bushel and the contract size is 5,000 bushels. Shortly before the delivery date, corn is selling..

What is unidas after-tax debt cost of capital : Unida Systems has 38 million shares outstanding trading for $10 per share. In addition, Unida has $114 million in outstanding debt. Suppose Unida's equity cost of capital is 18%, its debt cost of capital is 9 %, and the corporate tax rate is 34%. Wha..

Compare the three input devices and three output devices : Compare three input devices and three output devices. Criteria to address includes, but is not limited to: Expansion card type, Specific system requirements, Challenges with configuration and Firmware updates.

User Account

All Pages