corporate finance- solutions for chapter 7

Chapter 7
Bonds and Their Valuation
Solutions to End-of-Chapter Problems



7-1 $935.82.


7-2 VB = $985; M = $1,000; Int = 0.07  $1,000 = $70.

a. Current yield = 7.11%.
b. YTM = 7.2157%  7.22%.
c. $988.46.
7-3 $1,028.60.
7-4 YTM = 3.31%  2 = 6.62%.
YTC = 3.24%  2 = 6.49%.



7-5 a. 1. 5%: Bond L: $1,518.98.
Bond S: $1,047.62.

2. 8%: Bond L: $1,171.19.
Bond S: $1,018.52.

3. 12%: Bond L: $863.78.
Bond S: $982.14.


7-8 15.03%.

7-9 a.

1. 14.99%.

2. 6.00%.
7-10 a. YTM = 9.6911%.

b. CY = $80/$901.40 = 8.875%.

CGY = YTM – CY = 9.691% – 8.875% = 0.816%.


7-11 a. 5.1849%. the nominal YTM = 5.1849%(2) = 10.3699%  10.37%.
The nominal YTC = 5.0748%(2) = 10.1495%  10.15%.


b. The current yield = $120/$1,100 = 10.91%

c. YTM = Current yield + Capital gains (loss) yield
10.37% = 10.91% + Capital loss yield
-0.54% = Capital loss yield.


7-12 a. Yield to maturity (YTM):
YTM = 8.00%.

Yield to call (YTC):
YTC = 6.11%.