The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par (P1,000), have a 12% coupon, and mature in 30 years on December 31, 2008. Coupon payments are made semiannually (on June 30 and December 31). (a) What was the YTM of Pennington’s bonds on January 1, 1979? (b) What was the price of the bond on January 1, 1984, 5 years later assuming that the level of interest rate had fallen to 10%? (c) Find the current yield and capital gains yield on the bond on January 1, 1984, given the price as determined in Question b.
The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were
sold at par (P1,000), have a 12% coupon, and mature in 30 years on December 31, 2008. Coupon
payments are made semiannually (on June 30 and December 31).
(a) What was the YTM of Pennington’s bonds on January 1, 1979?
(b) What was the price of the bond on January 1, 1984, 5 years later assuming that the level
of interest rate had fallen to 10%?
(c) Find the current yield and
price as determined in Question b.
(d) On July 1, 2002, Pennington’s bonds sold for P916.42. What was the YTM at that date?
(e) What were the current yield and capital gains yield on July 1, 2002
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