Assume that Kendal Corp. has an outstanding bond issue with a par value of $1,000 and a current market price of $1,042.70 per bond. The bond has nine years remaining and a coupon rate of 6 percent. (Use Excel to answer this question. Enter your answer as a percent rounded to 2 decimal places.) a. Find the current yield to maturity for the Kendal Corp. bond. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Yield to maturity b. If the bond trades at a yield spread of 2.30 percent above comparable U.S. Treasury notes, what must the current yield on Treasury notes be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Treasury yield % % Make-whole yield Make-whole price c. If the Kendal bond has a make-whole call premium of 140 basis points above the U.S. Treasury rate, what is the make-whole call premium? (Do not round intermediate calculations. Enter the make-whole yield answer as a percent rounded to 2 decimal places. Enter the make-whole price answer in dollars rounded to 2 decimal places.) %
Assume that Kendal Corp. has an outstanding bond issue with a par value of $1,000 and a current market price of $1,042.70 per bond. The bond has nine years remaining and a coupon rate of 6 percent. (Use Excel to answer this question. Enter your answer as a percent rounded to 2 decimal places.) a. Find the current yield to maturity for the Kendal Corp. bond. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Yield to maturity b. If the bond trades at a yield spread of 2.30 percent above comparable U.S. Treasury notes, what must the current yield on Treasury notes be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Treasury yield % % Make-whole yield Make-whole price c. If the Kendal bond has a make-whole call premium of 140 basis points above the U.S. Treasury rate, what is the make-whole call premium? (Do not round intermediate calculations. Enter the make-whole yield answer as a percent rounded to 2 decimal places. Enter the make-whole price answer in dollars rounded to 2 decimal places.) %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Problem 18-26 Make-Whole Call Premium (LO2, CFA5)
Assume that Kendal Corp. has an outstanding bond issue with a par value of $1,000 and a current market price of $1,042.70 per bond.
The bond has nine years remaining and a coupon rate of 6 percent. (Use Excel to answer this question. Enter your answer as a
percent rounded to 2 decimal places.)
a. Find the current yield to maturity for the Kendal Corp. bond. (Do not round intermediate calculations. Enter your answer as a
percent rounded to 2 decimal places.)
Yield to maturity
b. If the bond trades at a yield spread of 2.30 percent above comparable U.S. Treasury notes, what must the current yield on Treasury
notes be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Treasury yield
%
%
Make-whole yield
Make-whole price
c. If the Kendal bond has a make-whole call premium of 140 basis points above the U.S. Treasury rate, what is the make-whole call
premium? (Do not round intermediate calculations. Enter the make-whole yield answer as a percent rounded to 2 decimal places.
Enter the make-whole price answer in dollars rounded to 2 decimal places.)
%
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