Year Cashflows discount factor discounted amount

1 115 1.075 106.976744186047

2 115 1.155625 99.5132504056247
3 115 1.242296875 92.5704654936044
4 115 1.335469140625 86.1120609242831
5 115 1.435629326172 80.1042427202634
5 1000 1.435629326172 696.558632350116
Price 1161.83539607994

0.303136
115 4.041812

Face Value 100 cashflow discount fa

coupon rate 5% 1 5 1.024
years to maturity 5 years 2 5 1.048576
YTM or r 2.40% 3 5 1.073742
Coupon amount 5 4 5 1.099512
5 105 1.1259
 Price

Face Value 1000 n cashflows

coupon rate 11.25% 1 56.25
semiannua return 0.085% 2 56.25
Year to maturity 3 years 3 56.25
Coupon amount 56.25 4 56.25
no of periods 6 5 56.25
6 1056.25

Elliot Enterprises’ bonds currently sell for $1,150, have an 11% coupon intere
a $1,000 par value, pay interest annually, and have 18 years to maturity.
a. Calculate the bonds’ current yield.
b. Calculate the bonds’ yield to maturity (YTM).

a Current yield annual interest/price

0.095652173913 or 9.56%

b Yield to maturity

Coupon
FV
MV
n

110 -8.33333333333333 0.094574 or 9.46%

1075
current yield = interest amount/price 0.066667

2.857143
125

Coupon 80
face value 1000
market price 1191.2
n 30

73.62666666667
1095.6
YTM 0.067202141901 or 6.7%

Coupon 80
 Call price 1080
year to call 3
Market price 1191.2

42.93333333333
1135.6
YTC 0.037806739462 or 3.78%

year Cashflows Dicount factor Dicounted values

1 80 1.1 72.7272727272727
2 80 1.21 66.1157024793388
3 80 1.331 60.1051840721262
4 80 1.4641 54.6410764292056
5 80 1.61051 49.6737058447324
6 80 1.771561 45.1579144043022
7 80 1.9487171 41.0526494584565
8 80 2.14358881 37.3205904167786 a1
9 80 2.357947691 33.9278094697988 a2
10 80 2.5937424601 30.8434631543625 a3
11 80 2.85311670611 28.0395119585114
12 1080 3.138428376721 344.121283127185
Price 863.726163542071
cf/1+r^n

0.696864111498258
464.808362369338
696.558632350116
1161.36699471945

discounted amount
4.8828125
4.76837158203125
4.65661287307739
4.54747350886464
93.2587340685131
 112.114004532486

discount factor discounted amount

1.00085 56.20223
1.0017007225 56.1545
1.00255216811413 56.10681
1.00340433745702 56.05916
1.00425723114386 56.01155
1.00511084979033 1050.879
Bond Value or Price 1331.413

ave an 11% coupon interest rate and

18 years to maturity.

annual interest 110

Price 1150

110
1000
1150
18
 6.66%

0.022857142857143 2.29%
Par-value 1000
coupon amount 80
n 12
r (1) 0.07
r (2) 0.08
r (3) 0.1
discount rate 0.1

price of bond @ r = 7% 1079 Premium

price of bond @ r = 8% 1000 at par
price of bond @ r = 10% 863.72 Discount

required rate = coupon rate sold at par

required rate > coupon rate discount
required rate < coupon rate Premium