Question

For the next 3 questions consider the following bonds, all with $1,000 par value: DA 6.5% coupon rate, 2-year, semiannual pay, bond priced to yield 6.5% II) A 9% coupon rate, 20-year, semiannual pay bond priced $839.54 FII) A 12% coupon rate, 10-year, annual pay bond priced to yield 6% DA zero-coupon, 20-year, bond priced to yield 16% one has the highest Current Yield? B) II C) III D) IV

ok disregard last pic can u pls answe 7, 8,9 pls

Answer 1

7. Bond II

8. Bond IV

9. Bond II [ since the term is longer and the YTM is lesser than the coupon rate]

Workings:

	Bond I	Bond II	Bond III	Bond IV
NPER	4.00	40.00	10.00	20.00
FV	1000	1000	1000	1000
PMT	32.5	45.0	120.0	0.0
Rate	3.25%	0.000%	6%	4.300%
PV	$1,000	$839.54	$1,442	$431
Current yield [PMT/PV]	6.50%	10.72%	8.32%	0.00%