The Wellington Corporation issued a new series of bonds on January 1, 1991! The bonds were sold at par (Rs.1.000) have a 12 percent coupon, and mature in 30 years, on December 31, 2020. Coupon payments are made semiannually (on June 30 and December 31). a) b) d) e) What was the yield to maturity (YTM) of Wellington's bonds on January 1, 1991? What was the price of the bond on January 1, 1996, five year later, assuming that the level of interest rates had fallen to 10 percent? Find the current yield and capital gains yield on the bond on January 1, 1996, given the price as determined in (b) above. What was the price of the bond on July 1, 2014, assuming the level of interest rates had risen up to 14 percent? What were the current yield and capital gain yield on July 1, 2014?
The Wellington Corporation issued a new series of bonds on January 1, 1991! The bonds were sold at par (Rs.1.000) have a 12 percent coupon, and mature in 30 years, on December 31, 2020. Coupon payments are made semiannually (on June 30 and December 31). a) b) d) e) What was the yield to maturity (YTM) of Wellington's bonds on January 1, 1991? What was the price of the bond on January 1, 1996, five year later, assuming that the level of interest rates had fallen to 10 percent? Find the current yield and capital gains yield on the bond on January 1, 1996, given the price as determined in (b) above. What was the price of the bond on July 1, 2014, assuming the level of interest rates had risen up to 14 percent? What were the current yield and capital gain yield on July 1, 2014?
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:The Wellington Corporation issued a new series of bonds on January 1, 1991. The bonds
were sold at par (Rs.1.000) have a 12 percent coupon, and mature in 30 years, on
December 31, 2020. Coupon payments are made semiannually (on June 30 and December
31).
a) What was the yield to maturity (YTM) of Wellington's bonds on January 1, 1991?
What was the price of the bond on January 1, 1996, five year later, assuming that
the level of interest rates had fallen to 10 percent?
b)
c) Find the current yield and capital gains yield on the bond on January 1, 1996, given
the price as determined in (b) above.
d) What was the price of the bond on July 1, 2014, assuming the level of interest rates
had risen up to 14 percent?
e) What were the current yield and capital gain yield on July 1, 2014?
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