Assume you can purchase a bond that had an 8% coupon and was currently selling for $890 in the market. What would be your current yield? 2. You work for a company that issued some bonds 6 years ago. The bonds at that time had 20 years until maturity and a 10% annual coupon. Interest rates on similar bonds today are paying 8%. What is the current price of the bond? 3. You are considering the purchase of a bond that has a $1,000 face or par value and a 9% coupon. This bond is currently selling for $1,100, has 10 years until maturity, and a call price of $1,050 in 5 years. Answer the following questions: a. What would be the yield-to-call if the bond is called 5 years from today? b. If the bond is not called and you hold it until maturity, what would be the yield-to-maturity? 4. What is the duration of a 10-year bond that is selling for $925, has a 7% coupon rate and is discounted at 9%?What is the duration of a 10-year bond that is selling for $925, has a 7% coupon rate and is discounted at 9%? 5. You have the opportunity to buy a 10-year, zero-coupon bond, that has a $1,000 par value. You require a yield of 10%. How much should you pay for the bond?
Required:
Using an MS Excel spreadsheet, address each of the above-noted questions and show all your calculations.
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