Question

Please solve, show work, and give detail explanation

1. A firm has 9.2% coupon bonds on the market with nine years to maturity. The bonds make semi-annual payments and currently sell for 106.8 percent of par. What is the yield-to- maturity (YTM) on these bonds? 2. An investment offers a 10.5 percent total return over the coming year. Sam thinks that the total real return on this investment will be only 4.5 percent. What does Sam believe the inflation rate will be for the next year? 3. Bond J is a 4% coupon bond. Bond K is a 10% coupon bond. Both have 5 years to maturity, make semiannual payments, and have a yield-to-maturity (YTM) of 6 percent. If interest rates suddenly rise by 1 percent, what is the percentage change in each the price of each of these bonds?

Answer 1

1

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2

k=1

K =9x2

1068 =∑ [(9.2*1000/200)/(1 + YTM/200)^k]     +   1000/(1 + YTM/200)^9x2

k=1

YTM% = 8.12

Please ask remaining parts seperately, questions are unrelated,