THEORY OF CAPITAL MARKET AND INVESTMENTS Bonds 101518645 Peniel Jefferson Simarmata P17-1 Calculate the price of a 12 percent

t coupon bond with eighteen years to maturity, given an appropriate discount rate of 15 percent, using both annual and semiannual discounting. Annual discounting

Price of bond: $80.8051 + $735.3559 = $816.161 Semiannual discounting

Price of bond: $74.0108 + $740.7913 = $814.8021 P17-2 The YTM on an 8 percent, 15-year bond is 10 percent. Calculate the price of the bond.

P17-3 Calculate the YTM for a 10-year zero-coupon bond sold at $450. Recalculate the YTM if the bond had been priced at $350.

P17-4 Calculate the realize compound yield for a 10 percent bond with 20 years to maturity and an expected investment rate of 8 percent.

Coupon income: 5% * $1,000 * 40 = $2,000 Assumed semiannual reinvestment rate: 4% Total return from coupons: $4,751.2758

RCY: ($5,751.2758/1,000) ^ (1/40) 1.0 = 0.0447 or 4.47% on a semiannual basis 4.47 * 2 = 8.94% on an annual basis P17-5 Consider a 12 percent 10-year bond purchased at face value. Base on Table 17-1 and assuming a reinvestment rate of 10 percent, calculate:
a) The interest-on-interest.

Coupon income: 6% * $1,000 * 20 = $1,200 Assumed semiannual reinvestment rate: 5% Total return from coupons: $1,983.9572

Interest-on-interest: $1,983.9572 - $1,200 = $783.9572.

b) The total return.

$1,983.9572 (see above).

c) The realized return.

RCY: ($2,983.9572/1,000) ^ (1/20) 1.0 = 0.0562 or 5.62% on a semiannual basis 5.62 * 2 = 11.24% on an annual basis P17-10 Calculate the YTM for the following bonds.
a) A 12 percent, 20-year bond with a current price of $925

b) A 6 percent, 10-year bond with a current price of $768

c) A 9 percent, 8-year bond with a current price of $814