Question

5. How to read the bond market page

The following is an excerpt from a bond price table. It shows data for bonds issued by three companies: BB&B, BellWest, and Fruitopia. The face value of each bond is $100.

Bonds	Cur Yld	Vol	Close	Net Chg
BB&B 6 1/2 13	6.8	95	9.5	–0.9
BellWest 6 3/4 33	6.4	36	10.5	–0.25
Fruitopia 10 1/2 09	9.7	2	10.8

The price of Fruitopia’s bond is [$95/$108/$111/$105].

[Bellwest's/Frutopia's/BB&B's bond] matures the earliest.

[Bellwest's/Frutopia's/BB&B's bond] was traded least actively.

If BB&B were to issue a bond on the same day this table appeared, with a face value of $100 and a maturity date of 2013, the annual coupon payment would need to be [$6.80/$6.40/$15.11/$9.70].

Answer 1

Calculate the price of fruitopia bond Price of bond Coupon interest Current yield = $100x10 2 9.7% $10.5 0.097 108.2474 Thus, the price of bond fruitopia is $108 Bond BB&B matures in year 2013, BellWest in 2033 and bond fruitopia matures in 2009 Thus, bond fruitopia matures the earliest Bond fruitopia is traded the least the net volume is only 2, compared to BB&B and BellWest The bond is issued at par value of $100. Thus, the yield and coupon rate is the same. Annual coupon payment Face valuex Coupon interest rate - $100 x 6.8% -S6.80 Thus, the annual coupon payment is $6.80