91011 Periods per year:12 Periods to maturity:13 Coupon rate:14 Par value:15 Periodic payment16 Current price17 Call price:18 Years till callable:19 Periods till callable:PasteF17888588RFN66Basic Input Data:Years to maturity:6768AEGH6 A 20-year, 6% quarterly coupon bond with a par value of $10,000 may be called in 5 years at a call price of $10,200. The bond7 sells for $10.500. (Assume that the bond has just been issued.).869702021 a. What is the bond's yield to maturity?222324252627 b. What is the bond's current yield?28293031323334 c. What is the bond's capital gain or loss yield?353637383940 Note that this is an economic loss, not a loss for tax purposes.417142 d. What is the bond's yield to call?4372XBCap. Gain/loss yield =Cap. Gain/loss yield =Cap. Gain/loss yield =ArialCurrent yield =Current yieldCurrent yield =BIU ERate, r✓53 NOW ANSWER THE FOLLOWING NEW QUESTIONS:54Ready▸Peridodic YTM=Annualized Nominal YTM0%1%3%ŠfixPeridodic YTC =Annualized Nominal YTCD44 Here we can again use the Rate function, but with data related to the call.454647This is a nominal rate, not the effective rate. Nominal rates are generally quoted.4849 The YTC is lower than the YTM because if the bond is called, the buyer will lose the difference between the call price and the current50 price in just 4 years, and that loss will offset much of the interest imcome. Note too that the bond is likely to be called and replaced,51 hence that the YTC will probably be earned.52Value of Bond If:Not called$0.00Called$0.00155 e. How would the price of the bond be affected by changing the going market interest rate? Assume Norminal Market rate56 is 6%. (Hint: Conduct a sensitivity analysis of price to changes in the going market interest rate for the bond. Assume that57 the bond will be called if and only if the going rate of interest falls below the coupon rate. That is an oversimplification, but58 assume it anyway for purposes of this problem.)5960 Nominal market rate, r61 Value of bond if it's not called:62 Value of bond if it's called:63Build a Model64 We can use the two valuation formulas to find values under different r's, in a 2-output data table, and then use an IF65 statement to determine which value is appropriate:0%10VActual value,consideringcall likehood:+Accessibility: InvestigateA AAF|||Hint: Write formula in words.Hint: Cell formulas should refer to Input Section(Answer)Hint: Write formula in words.Hint: Cell formulas should refer to Input Section(Answer)Hint: This is a nominal rate, not the effective rate. Nominal rates are generally quoted.IThe bond would not be called unless r

Question

91011 Periods per year:12 Periods to maturity:13 Coupon rate:14 Par value:15 Periodic payment16 Current price17 Call price:18 Years till callable:19 Periods till callable:PasteF17888588RFN66Basic Input Data:Years to maturity:6768AEGH6 A 20-year, 6% quarterly coupon bond with a par value of $10,000 may be called in 5 years at a call price of $10,200. The bond7 sells for $10.500. (Assume that the bond has just been issued.).869702021 a. What is the bond's yield to maturity?222324252627 b. What is the bond's current yield?28293031323334 c. What is the bond's capital gain or loss yield?353637383940 Note that this is an economic loss, not a loss for tax purposes.417142 d. What is the bond's yield to call?4372XBCap. Gain/loss yield =Cap. Gain/loss yield =Cap. Gain/loss yield =ArialCurrent yield =Current yieldCurrent yield =BIU ERate, r✓53 NOW ANSWER THE FOLLOWING NEW QUESTIONS:54Ready▸Peridodic YTM=Annualized Nominal YTM0%1%3%ŠfixPeridodic YTC =Annualized Nominal YTCD44 Here we can again use the Rate function, but with data related to the call.454647This is a nominal rate, not the effective rate. Nominal rates are generally quoted.4849 The YTC is lower than the YTM because if the bond is called, the buyer will lose the difference between the call price and the current50 price in just 4 years, and that loss will offset much of the interest imcome. Note too that the bond is likely to be called and replaced,51 hence that the YTC will probably be earned.52Value of Bond If:Not called$0.00Called$0.00155 e. How would the price of the bond be affected by changing the going market interest rate? Assume Norminal Market rate56 is 6%. (Hint: Conduct a sensitivity analysis of price to changes in the going market interest rate for the bond. Assume that57 the bond will be called if and only if the going rate of interest falls below the coupon rate. That is an oversimplification, but58 assume it anyway for purposes of this problem.)5960 Nominal market rate, r61 Value of bond if it's not called:62 Value of bond if it's called:63Build a Model64 We can use the two valuation formulas to find values under different r's, in a 2-output data table, and then use an IF65 statement to determine which value is appropriate:>0%10VActual value,consideringcall likehood:+Accessibility: InvestigateA AAF|||Hint: Write formula in words.Hint: Cell formulas should refer to Input Section(Answer)Hint: Write formula in words.Hint: Cell formulas should refer to Input Section(Answer)Hint: This is a nominal rate, not the effective rate. Nominal rates are generally quoted.IThe bond would not be called unless r

Accepted Answer

“Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

A 20-year, 6% quarterly coupon bond with a par value of $10,000 may be called in 5 years at a call price of $10,200. The bond sells for $10.500. (Assume that the bond has just been issued.) Basic Input Data: Years to maturity: