What is the bonds current yield

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Problem 5-12 using a spreadsheet. After completing questions a through d, answer the new question.

A 10-year 12 percent semiannual coupon bond, with a par value of $1,000, may be called in 4 years at a call price of $1,060. The bond sells for $1,100. (Assume that the bond has just been issued.)

Work parts a through d with a spreadsheet. You can also work these parts with a calculator to check your spreadsheet answers if you aren't confidient of your spreadsheet solution. You must then go on to work the remaining parts with the spreadsheet.

• What is the bond's yield to maturity?
• What is the bond's current yield?
• What is the bond's capital gain or loss yield?
• What is the bond's yield to call?

• How would the price of the bond be affected by a change in the going market interest rate? (Hit: Conduct a sensitivity analysis of price to changes in the going market rate for the bond. Assume 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 the purpose of this problem.)

Reference no: EM131509325

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