Question

3. Assume that an investor is looking at two bonds: Bond A is a 10-year, 1 1 .5% (semiannual pay) bond that is priced to yield 13%. Bond B is a 10-year, 10.5% (annual pay) bond that is priced to yield 11%. Both bonds carry 5-year call deferments and call prices (in 5 years) of $1,060 a. Which bond has the higher current yield? b. Which bond has the higher YTM? c. Which bond has the higher YTC? a. The current yield of Bond A is The current yield of Bond B is Which bond has the higher current yield? (Select the best answer below.) %. (Round to two decimal places.) %. (Round to two decimal places.) ( A, O B. Bond B has a higher current yield of 12.54%. Bond A has a higher current yield of 12.54%. b. The YTM of Bond A is %. (Round to two decimal places.) The YTM of Bond B is %. (Round to two decimal places.) Which bond has the higher YTM? (Select the best answer below.) O A. Bond A has a higher YTM of 13%. B. Bond B has a higher YTM of 13%. c. The YTC of Bond A is The YTC of Bond B is Which bond has the higher YTC? (Select the best answer below.) O A. Bond B has a higher YTC of 14.75%. %. (Round to two decimal places.) %, (Round to two decimal places.) O B. Bond A has a higher YTC of 14.75%.

Answer 1

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Home ert Page Layout Formulas Data Review V Add-Ins 義Cut aCopy Format Painter Σ AutoSum , Fill В า 프. m. a-Δ. Ξミ 迣锂函Merge & Center. $, % , 弼皛Conditional Format. Cell. Insert Delete Format Sort &Find & Formatting as Table Styles ClearFilter Select Clipboard Font Alignment Cells dting Formula Bar 47 48 49 BOND B BOND A YEARS COUPON PAR VALUE COUPON (S) PERIODS 10 11.50% 1000 115 COUPON PAR VALUE COUPON (S) PERIODS 10 10.50% 1000 105 51 52 53 54 13% 11% PRICE 917.36 PRICE 970.55 56 57 58 a 59 60 ANS 61 62 b 63 [-PV(D53/D52,D48*D52,-D51/D52,-D50)] [-PV(J53/J52,J48*J52,-J51/J52,-150)] CURRENT YIELD 12.54% [D51/D55] CURRENT YIELD 10.82% [J51/55] BOND A HAS HIGHER CURRENT YIELD OF 12.54% YTM OF BOND A YTM OF BOND B 1396 GIVEN 1196 GIVEN 65 ANS A: BOND A HAS HIGHER YTM OF 13% UAC AW PM LIFE LP IP MRP. INFLATION YIELD WARRANT efund bond CLEAN INVOICE PRICE Sheet1 Sheet3 Sheet4 SheetS Sheet6 Sheet? SheetB 匂 014 25-03-2019

Home ert Page Layout Formulas Data Review V 義Cut ta copy ▼ Format Painter Add-Ins 短 Σ AutoSum , Fill В า 프. m. a-Δ. Ξミ 迣锂函Merge & Center. $, % , 弼皛Conditional Format. Cell. Insert Delete Format Sort &Find & Formatting as Table Styles ClearFilter Select Clipboard Font Alignment Cells dting 67 CALLABLE IN (YEARS) CALL PRICE CALLABLE IN (YEARS) CALL PRICE 1060 1060 69 70 71 72 73 74 C 75 76 YTC 7 .37% YTC 12.26% -RATE(D67*D52,-D51/D52,D55,-D68)] [-RATE(167*)52,-51/52,J55,-168)) YTC (ANNUAL) 14.75% YTC FOR BOND A YTC FOR BOND B 14.75% 12.26% BOND A HAS YTC OF 14.75% 78 79 80 81 82 83 84 UAC AW PM LIFE LP IP MRP. INFLATION YIELD WARRANT efund bond CLEAN INVOICE PRICE Sheet1 Sheet3 Sheet4 SheetS Sheet6 Sheet? Sheet8 014 "z 园遛14.י'alt@ m 4ø ENG 25-03-2019