Bond valuation Problems In Tutorial Library

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TITLE: Bond valuation Problems

CLASS / COURSE: Finance

QUESTION DESCRIPTION:

Week 4:  You are given the following data on bonds from AT&T, Dell, and IBM. Each bond has a par value of $1000.

 

AT&T

Dell

IBM

Coupon

6.80

6.50

8.375%

Maturity

05/15/2036

04/15/2038

11/01/2019

Frequency

Semiannual

Semiannual

Semiannual

Rating

A

A-

A+

1.    Calculate the value of the bond if your required return is 5 percent on AT&T, 6.5 percent on Dell, and 8 percent on IBM.

2.    Determine the yield to maturity (YTM) on the bonds given the following prices.

 

AT&T

Dell

IBM

Price

$1,060.00

$1,016.57

$1,307.78

3.    Based on each bond’s ratings and your determination of its yield to maturity explain how you rank each bond for risk and return.

4.    Assume you had $10,000 to invest.  How many of each bond would you have? What dollar amount of interest would each bond return on the investment for the next year? What would your percentage return be for the year, that is, your interest payments divided by the total amount invested? You must submit your backup in Excel or other supporting documentation showing how answers were reached.

The final project assignment continues in Week 4. On Week 4, Day 6, place this assignment in the W4: Assignment 3 Dropbox.

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SUBJECTS / CATEGORIES:
1. Finance
2. Financial Management
3. Accounting
4. Corporate Finance
5. Investment and Portfolio Management

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