Taussig Corp.'s bonds currently sell for $960. They have a 6.35% annual coupon rate, a $1,000 par value, and a 20-year maturity, but they can be called in 5 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that rates expected to remain at current levels on into the future. Under these conditions, calculate the YTM and YTC.

Taussig Corp.'s bonds currently sell for $960. They have a 6.35% annual coupon rate, a $1,000 par value, and a 20-year maturity, but they can be called in 5 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that rates expected to remain at current levels on into the future. Under these conditions, calculate the YTM and YTC.

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

See similar textbooks

Similar questions

Uliana Company wants to issue new 19-year bonds for some much-needed expansion projects. The company currently has 10.3 percent coupon bonds on the market that sell for $1,143, make semiannual payments, have a par value of $1,000, and mature in 19 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Answer is complete but not entirely correct.
Bond J has a coupon rate of 5 percent. Bond K has a coupon rate of 15 percent. Both bonds have eight years to maturity, a par value of $1,000, and a YTM of 11 percent, and both make semiannual payments. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a. Percentage change in price b. Percentage change in price Bond J % % Bond K % %
McCue Inc.'s bonds currently sell for $1,245. They pay a $80 annual coupon, have a 7-year maturity, and a $1,000 par value, but they can be called in 4 years at $1,080. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bond's YTM and its YTC? (Subtract the YTC from the YTM; it is possible to get a negative answer.) O 0.56% O 0.86% O 0.66% O 0.76% 0.96%
Dizzy Inc. wishes to issue new bonds but is uncertain how the market would set the yield to maturity. The bonds would be 20-year, 3.5% semi-annual coupon bonds with a $1,000 par value. Dizzy has determined that these bonds would sell for $887.45 each. Expressed as an annual percentage rate, what is yield to maturity for these bonds? 6.54% 9.54% 8.15% 7.35%
Blue Jazz, Inc., has 5.4 percent coupon bonds on the market that have 20 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 5.2 percent, the current price of the bond $______. Round it two decimial places, and do not include the $ sign, e.g., 935.67. Your Answer: Answer
McCurdy Co.'s Class Q bonds have a 12-year maturity, $1,000 par value, and a 10% coupon paid semiannually (5% each 6 months), and those bonds sell at their par value. McCurdy's Class P bonds have the same risk, maturity, and par value, but the p bonds pay a 10% annual coupon. Neither bond is callable. At what price should the annual payment bond sell? Select the correct answer. Oa. $992.23 b. $989.21 O c. $986.19 Od. $980.15 e. $983.17
Kebt Corporation's Class Semi bonds have a 12-year maturity and an 8.75% coupon paid semiannually (4.375% each 6months), and those bonds sell at their $1,000 par value. The firm's Class Ann bonds have the same risk, maturity,nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is callable. At what priceshould the annual payment bond sell?
Pybus, Inc. is considering issuing bonds that will mature in 15 years with an annual coupon rate of 9 percent. Their par value will be $1,000, and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bonds and, if it does, the yield to maturity on similar AA bonds is 12 percent. However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an A rating, the yield to maturity on similar A bonds is 13 percent. What will be the price of these bonds if they receive either an A or a AA rating? Question content area bottom Part 1 a. The price of the Pybus bonds if they receive a AA rating will be $enter your response here
Kebt Corporation's Class Semi bonds have a 15-year maturity and a 7.25% coupon paid semiannually (3.625% each 6 months), and those bonds sell at their $1,000 par value. The firm's Class Ann bonds have the same risk, maturity, nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is callable. At what price should the annual payment bond sell? Do not round your intermediate calculations. a. $988.31 b. $1,000.00 c. $1,035.90 d. $678.87 e. $992.53

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

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

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

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

SEE MORE TEXTBOOKS