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
Related questions
Question
10. Bond listings and yield spreads
The following bond list is from the business section of a financial newspaper on January 1, 2016. Assume that each bond shown matures on January 1 in 5, 10, or 30 years. Each bond shown pays a semiannual coupon and the coupon rate is in the column labeled Coupon.
The Last Price and Last Yield columns indicate each bond’s price and YTM at the end of trading. EST Spread indicates the bond’s spread above the relevant US Treasury benchmark, expressed as a percentage. UST indicates which US Treasury security maturity is the relevant benchmark for each bond. EST Volume shows the number of bonds traded during the day. Notice also that prices are stated relative to a par value of $100. Assume all bonds have the same default premium.
A. Fill in the value of The Blue Co.’s bonds.
|
Company
|
Coupon
|
Maturity
|
Last Price
|
Last Yield
|
EST Spread
|
UST (Years)
|
EST Volume (1000s)
|
|---|---|---|---|---|---|---|---|
| Vandelay Inc. | 8.25% | 01-01-2026 | $97.87 | 8.57% | 2.37% | 10 | 59,725 |
| Monic Corp. | 5.80% | 01-01-2021 | $99.22 | 5.98% | 0.58% | 5 | 52,930 |
| ABC Inc. | 8.98% | 01-01-2026 | $104.07 | 8.37% | 2.17% | 10 | 46,932 |
| Wayne Inc. | 9.63% | 01-01-2046 | $88.14 | 10.98% | 4.03% | 30 | 45,120 |
| The Blue Co. | 4.13% | 01-01-2021 | 6.26% | 0.86% | 5 | 43,960 |
B. If you were to calculate the yield on a security with a 10-year US Treasury security, the yield will be equal to .
C. Which bond is trading at a premium?
Monic Corp.
Vandelay Inc.
ABC Inc.
Wayne Inc.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education