What is the yield to maturity of a bond with the following characteristics?
$1350 price today; 7% coupon, paid semi-annually; 6 years to maturity; $1,000 face value.
Assume semi-annual interest compounding. Round your answer to 4 decimal places. For example, if your answer is 3.205%, then please write down 0.0321.
Question 3
2 p
Calculate the clean (flat) price of a bond, assuming the following.
Transaction settlement date is 2-15-2018. Bond maturity date is 9-30-2020. Par = $100.
Coupon rate is 5%, and coupons are paid semi-annually. The bond is trading at a YTM of 7%. The day-count convention is 30/360.
Assume semi-annual interest compounding. Round your answer to the nearest cent (2 decimal places).
Question 4
2 p
As a winner of a local competition, you can choose one of the following prizes. If the annual interest rate is 12% compounded annually, which prize is the most valuable?
Option 1: $110,000 now
Option 2: $15,000 now, and $15,000 per year starting next year for 10 years
Option 3: $18,000 per year starting next year for 10 years
Option 4: $170,000 at the end of 4 years.