1. Riders Corp has a bond on the market with 13 years to maturity, a yield to maturity of 7.5 percent, ad a current price of $938. What must the coupon rate be on the company's bond?
2. Grays Pizzas issued 20 year bonds one year ago at a coupon rate of 8.40 percent. If the yield to maturity on these bonds is 9.02 percent, what is the current bond price?
3. Sopranos Factory issued 30 year bonds two years ago at a coupon rate of 7.5 percent. If these bonds currently sell for 84 percent of par value, what is the yield to maturity.
Need help understanding how to get the answers. Please.
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Web search "bond yield formula" and go to the investopedia link and it will give you the formula.
You need to be certain you understand the relationship between yield (coupon), maturity and price. The coupon in number 1 will be lower than 7.5 percent. The price in number 2 will be less than par (which is generally $1000). The YTM in number 3 will be higher than the coupon rate of 7.5%.
Once you get the formula down, you need to be certain you know the relationship so you can look at your calculated answers to see if they look reasonable.
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