finance

posted by .

Brown Enterprises’ bonds currently sell for $1,025. They have a 9-year maturity, an annual coupon of $80, and a par value of $1,000. What is their current yield?

  • finance -

    So the present value
    = 1000(1+i)^-9 + 80(1 - (1+i)^-9 )/i

    so 1000(1+i)^-9 + 80(1 - (1+i)^-9 )/i = 1025

    A very nasty equation to solve.

    I tried a few values:
    i = .08, RS = 1000 , looking for 1025
    i = .09, RS = 940, so let's lower the i
    i = .07, RS = 1065 , too low
    i = .075, RS = 1031.894 getting closer
    i = .077, RS = 1018.977

    ok, so i is between .075 and .077

    .075 .... 1031.894
    i ...........1025
    .077 ......1018.977

    use interpolation by setting up a ratio

    (i - .075)/(.077-.075) = (1025-1031.894)/(1018.977-1031.894)

    I will leave the arithmetic up to you, but I got
    i = .07607

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Finance

    brown enterprises' bonds currently sell for $1,025. They have a 9 year maturity, an annual coupon of $80, and a par value of $1,000. what is their yield to maturity?
  2. finance

    Brown Enterprises’ bonds currently sell for $1,025. They have a 9-year maturity, an annual coupon of $80, and a par value of $1,000. What is their current yield?
  3. FINANCE

    BONDS CURRENTLY SELL FOR $1,025 THEY HAVE A 9 YEAR MATURITY AND AN ANNUAL COUPON RATE OF $80 AND A PAR VALUE OF !1,000 WHAT IS THEIR CURRENT YEILD
  4. Finance

    Brown Enterprises’ bonds currently sell for $1,025. They have a 9-year maturity, an annual coupon of $80, and a par value of $1,000. What is their current yield?
  5. finance

    Adams Enterprises’ noncallable bonds currently sell for $1,120. They have a 15- year maturity, an annual coupon of $85, and a par value of $1,000. What is their yield to maturity?
  6. Finance

    Which of the following statments is CORRECT?
  7. finance

    1. Yest Corporation's bonds have a 15-year maturity, a 7% semiannual coupon, and a par value of $1,000. The market interest rate (r) is 6%, based on semiannual compounding. What is the bond’s price?
  8. finance

    adams enterprises noncallable bonds currently sell for $1030. they have a 15 year maturity, an annual coupon of $85, and par value of $1000. what is their yeild of maturity?
  9. finance

    Coles Inc's bonds currently sell for $1,180 and have a par value of $1,000. The pay a $65 annual coupon and have a 15 year maturity, but they can be called in 5 years at $1,100. What is their yield to maturity (YTM)?
  10. finance

    Sadik Inc.'s bonds currently sell for $1,270 and have a par value of $1,000/. They pay a $105 annual coupon and have a 15 year maturity, but they can be called in 5 years at $1,000. What is their yield to call (YTC)?

More Similar Questions