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Davis & Davis issued a bonus to $ 1,000 par value at $ 102. The bond...

Davis & Davis issued a bonus to $ 1,000 par value at $ 102. The bond pays 12% annual interest and expires at 30 years. The market value performance is (round it to the nearest hundred percent)

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Answer #1

Par Value = $1,000

Current Price = 102% * $1,000
Current Price = $1,020

Annual Coupon Rate = 12%
Annual Coupon = 12% * $1,000
Annual Coupon = $120

Time to Maturity = 30 years

Let Annual YTM be i%

$1,020 = $120 * PVIFA(i%, 30) + $1,000 * PVIF(i%, 30)

Using financial calculator:
N = 30
PV = -1020
PMT = 120
FV = 1000

I = 11.76%

Annual YTM = 11.76%

The market value performance is 11.76%

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