ANSWER ALL QNS USING EXCEL
1. XYZ Corporation issued a bond on 1 January 2009 with maturity on 31 December 2016. The bond had a coupon rate of 8% and the yield to maturity was 9% on 1 January 2009. The face value of the bond is $100 and coupons are paid semi-annually.
(a) Calculate the price at which the bond was issued on 1 January 2009.
(b) On 1 January, 2012, the yield to maturity is 8.5%. Calculate the price at which the bond will sell on 1 January 2012. The price will be after coupon is paid.
(c) If you purchased the bond on 1 January 2009 at the price derived from part (a), and sold the same bond on 1 January 2012 at the price derived from part (b), calculate the annual rate of return from this investment. Note that this investment provides periodic coupon payments.
