Yields, Coupon Rates, Bonds, etc

Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 15 years to maturity, and a coupon rate of 6.5 percent paid annually.

If the yield to maturity is 7.6 percent, what is the current price of the bond? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

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Current price €

Page Enterprises has bonds on the market making annual payments, with eight years to maturity, and selling for $952. At this price, the bonds yield 6.10 percent.

What must the coupon rate be on the bonds? (Round your answer to 2 decimal places. (e.g., 32.16))

Coupon rate %

Martin Software has 8.8 percent coupon bonds on the market with 19 years to maturity. The bonds make semiannual payments and currently sell for 107.2 percent of par.

What is the current yield on the bonds? (Round your answer to 2 decimal places. (e.g., 32.16))

Current yield %

What is the YTM? (Round your answer to 2 decimal places. (e.g., 32.16))

YTM %

What is the effective annual yield? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Effective annual yield %

Backwater Corp. has 10 percent coupon bonds making annual payments with a YTM of 9.4 percent. The current yield on these bonds is 9.75 percent.

How many years do these bonds have left until they mature? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Maturity of bond years

Treasury bills are currently paying 6 percent and the inflation rate is 2.80 percent.

What is the approximate real rate of interest? (Round your answer to 2 decimal places. (e.g., 32.16))

Approximate real rate %

What is the exact real rate? (Round your answer to 2 decimal places. (e.g., 32.16))

Exact real rate %

Feeback Corporation stock currently sells for $50 per share. The market requires a return of 8 percent on the firm’s stock. If the company maintains a constant 2 percent growth rate in dividends, what was the most recent dividend per share paid on the stock? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

Dividend paid per share $

The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.55 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year indefinitely. Investors require a return of 14 percent on the company’s stock.

What is the current stock price? (Round your answer to 2 decimal places. (e.g., 32.16))

Current price $

What will the stock price be in three years? (Round your answer to 2 decimal places. (e.g., 32.16))

Stock price $

What will the stock price be in 7 years? (Round your answer to 2 decimal places. (e.g., 32.16))

Stock price $

Apocalyptica Corp. pays a constant $9.05 dividend on its stock. The company will maintain this dividend for the next 9 years and will then cease paying dividends forever. If the required return on this stock is 10 percent, what is the current share price? (Round your answer to 2 decimal places. (e.g., 32.16))

Current share price $

Sully Corp. currently has an EPS of $2.30, and the benchmark PE for the company is 22. Earnings are expected to grow at 5 percent per year.

a. What is your estimate of the current stock price? (Round your answer to 2 decimal places. (e.g., 32.16))

Current stock price $

b. What is the target stock price in one year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Target stock price $

c. Assuming the company pays no dividends, what is the implied return on the company’s stock over the next year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Implied return of stock %

Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $2.90 next year. The growth rate in dividends for all three companies is 4 percent. The required return for each company’s stock is 6 percent, 9 percent, and 12 percent, respectively. What is the stock price for each company? (Round your answers to 2 decimal places. (e.g., 32.16))

Stock price
Red, Inc. $

Yellow Corp. $

Blue Company $

Solution Preview
1) Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 15 years to maturity, and a coupon rate of 6.5 percent paid annually.

If the yield to maturity is 7.6 percent, what is the current price of the bond? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Current price €

Rate (YTM) = 7.60%
Number of periods = 15
Coupon amount per period (PMT) € 65.00
Maturity value, FV = € 1,000.00

Current bond price = € 903.50 [using PV function]

2) Page Enterprises has bonds on the market making annual payments, with eight years to maturity, and selling for $952. At this price, the bonds yield 6.10 percent.

What must the coupon rate be on the bonds? (Round your answer to 2 decimal places. (e.g., 32.16))

Coupon rate %

Rate (YTM) = 6.10%
Number of payments = 8
Current bond price, PV = $952
Maturity value, Fv = $1,000

Annual coupon amount = $53.24 [Using pmt () function)

Annual coupon amount works out to $53.24.
Therefore, annual coupon rate = $53.24/$1,000  5.32%

3) Martin Software has 8.8 percent coupon bonds on the market with 19 years to maturity. The bonds make semiannual payments and currently sell for 107.2 percent of par.

What is the current yield on the bonds? (Round your answer to 2 decimal places. (e.g., 32.16))

Current yield %

Current market price = $1,000 * 107.2%  $1,072
Annual coupon amount = $1,000 * 8.8%  $88
Current yield = Annual coupon amount/Current market price = 88/1072  8.21%

What is the YTM? (Round your answer to 2 decimal places. (e.g., 32.16))

YTM %

Number of periods, nper [19 years * twice a year] 38
Payments per period [$1000*8.8%*6/12] $ 44
Current …

Solution Summary
The expert examines Page Enterprises for bonds on the marketing making annual payments.

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