Notice also that prices are stated relative to a par value of $100. Assume all bonds have the same default premium. Fill in the value of Powell Co.’s bonds. Company Coupon Maturity Last Price Last Yield EST Spread UST (Years) EST Volume (1000s) Vandelay Inc. 8.25% 01-01-2026 $97.87 8.57% 2.37% 10 59,725 Side Corp. 5.80% 01-01-2021 $99.22 5.98% 0.58% 5 52,930 Acme Inc. 8.98% 01-01-2026 $104.07 8.37% 2.17% 10 46,932 Wizard Co. 9.63% 01-01-2046 $88.14 10.98% 4.03% 30 45,120 Powell Co. 4.13% 01-01-2021 Q1. ____ (Answer here) 6.26% 0.86% 5 43,960
Notice also that prices are stated relative to a par value of $100. Assume all bonds have the same default premium. Fill in the value of Powell Co.’s bonds. Company Coupon Maturity Last Price Last Yield EST Spread UST (Years) EST Volume (1000s) Vandelay Inc. 8.25% 01-01-2026 $97.87 8.57% 2.37% 10 59,725 Side Corp. 5.80% 01-01-2021 $99.22 5.98% 0.58% 5 52,930 Acme Inc. 8.98% 01-01-2026 $104.07 8.37% 2.17% 10 46,932 Wizard Co. 9.63% 01-01-2046 $88.14 10.98% 4.03% 30 45,120 Powell Co. 4.13% 01-01-2021 Q1. ____ (Answer here) 6.26% 0.86% 5 43,960
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Bond listings and yield spreads
The following bond list is from the business section of a financial newspaper on January 1, 2016. Assume that each bond shown matures on January 1 in 5, 10, or 30 years. Each bond shown pays a semiannual coupon and the coupon rate is in the column labeled Coupon.
The Last Price and Last Yield columns indicate each bond’s price and YTM at the end of trading. EST Spread indicates the bond’s spread above the relevant US Treasury benchmark, expressed as a percentage. UST indicates which US Treasury security maturity is the relevant benchmark for each bond. EST Volume shows the number of bonds traded during the day. Notice also that prices are stated relative to a par value of $100. Assume all bonds have the same default premium.
Fill in the value of Powell Co.’s bonds.
|
Company
|
Coupon
|
Maturity
|
Last Price
|
Last Yield
|
EST Spread
|
UST (Years)
|
EST Volume (1000s)
|
|---|---|---|---|---|---|---|---|
| Vandelay Inc. | 8.25% | 01-01-2026 | $97.87 | 8.57% | 2.37% | 10 | 59,725 |
| Side Corp. | 5.80% | 01-01-2021 | $99.22 | 5.98% | 0.58% | 5 | 52,930 |
| Acme Inc. | 8.98% | 01-01-2026 | $104.07 | 8.37% | 2.17% | 10 | 46,932 |
| Wizard Co. | 9.63% | 01-01-2046 | $88.14 | 10.98% | 4.03% | 30 | 45,120 |
| Powell Co. | 4.13% | 01-01-2021 | Q1. ____ (Answer here) | 6.26% | 0.86% | 5 | 43,960 |
If you were to calculate the yield on a security with a 10-year US Treasury security, the yield will be equal to Q2. _____.
Q3. Which bond is trading at a premium?
a. Wizard Co.
b. Powell Co.
c. Vandelay Inc.
d. Acme Inc.
Q1. Option 1 $90.98 or $92.86 or $87.46 or $90.98
Q2. Option 1 2.17% or 2.37% or 4.30% or 6.20%
Please answer with the options provided.
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