SOLUTIONS TO Chapter 6

6-1 PV = $935.82.
6-2

YTM = 12.48%.
6-3 YTM = 3.31% 2 = 6.62%.
YTC = 3.24% 2 = 6.49%.

6-4
6-5

Current yield = $90/$1,052.08 = 8.55%.

PV = $1,028.60

6-6

a.
1. 5%:

Bond L:
Bond S:

VB = $1,518.97.
VB = $1,047.64.

2. 8%:

Bond L:
Bond S:

VB = $1,171.15.
VB = $1,018.49.

3. 12%: Bond L:
Bond S:

VB = $863.79.
VB = $982.19.

Calculator solutions:
1. 5%:

Bond L:
Bond S:

PV = $1,518.98.
PV = $1,047.62.

2. 8%:

Bond L:
Bond S:

PV = $1,171.19.
PV = $1,018.52.

3. 12%: Bond L:
Bond S:
6-7

PV = $863.78.
PV = $982.14.

a.
1. I = 14.99%.

6-8
6-9

2. I = 6.00%.
I = 15.03%.
a. The nominal annual rate = 5.1849%(2) = 10.3699% 10.37%.
b. The current yield = 10.91%.
c.

-0.54% = Capital Loss Yield.

d. The nominal annual rate = 5.0748%(2) = 10.1495% 10.15%.

6-10

I = YTM = 8.65%.

6-11

Current yield = 10.78%.

6-12

YTC = 6.47%.

6-13

a. PV = $1,251.22.
b. PV = $898.94.

6-14

10-year, 10% annual coupon

10-year zero
5-year zero
30-year zero
$100 perpetuity
6-15

Price at 8%
$1,134.20
463.19
680.58
99.38
1,250.00

Price at 7%
$1,210.71
508.35
712.99
131.37
1,428.57

a.
t
0
1
2
3
4

Price of Bond C
$1,012.79
1,010.02
1,006.98
1,003.65
1,000.00

Price of Bond Z
$ 693.04
759.57
832.49
912.41
1,000.00

Pctge. change
6.75%
9.75
4.76
32.19
14.29