1. Six-year bond with annual coupons is bought to yield
6: (6.6):(1), (6.6):(3), (6.7):(1), (6.7):(2), (6.7):(4), (6.9):(1), (6.9):(2), (6.9):(3),6.6:1A
$2,500 14% six-year bond with annual coupons is bought to yield 6% annually. The price is
$3,432.26. Find its clean and dirty values at the end of each quarter of the forth year after
issue, by the practical method and also by the theoretical method.6.6:3As in Problem (6.5,5)
we are concerned with three-year $1,000 6% bond with semiannual coupons and
redemption amount $1,040. Suppose that the bond was purchased on January 1, 2000.
Make a chart showing the theoretical and practical dirty and clean values of the bond at the
end of each quarter if the bond was purchased at the discount to yield a nominal rate of 7%
convertible semiannually. Use the “30/360” basis for accounting.6.7:1Miguel purchases a
$22,000 9% fifteen-year par-value bond having annual coupons for a price to provide a 7%
annual yield if the bond is held to maturity. Five years later, just after the receipt of the fifth
coupon, he sells it at a price to provide the new purchaser a yield to maturity of 8%. Find
the difference between Miguel’s book value B5 and the invoice price. What was Miguel’s
actual yield for the five-year period?6.7:2A $1,000 seven-year 6% bond with semiannual
coupons is redeemable for $1,065. It was originally purchased at issue for $970. It is sold
after 45 months for $995. Find the accrued interest by the practical method and again by
the theoretical method using the new yield to maturity.6.7:4Jiayin purchases a ten-year 8%
$62,000 par-value bond with annual coupons eighty months after its issue. The original
purchaser paid a price to yield 8.5% if the bond was held until maturity, as does Jiayin.
Compute the accrued interest by the theoretical method at 8.5% and also by the practical
method. Find the split of the accrued interest by the theoretical method at 8.5% into
interest and principal.6.9:1Dominique LeBlanc is the owner of a new ten-year %50,000 8%
par-value bond with Bermuda option and annual coupons. Allowable call dates are at the
end of years 6 through 10, and the call premium at the end of year n is $300(10-n).
Dominique purchased the bond for $51,248.(a) Find the lowest yield the Dominique may
receive during the period she holds the bond as well as the highest.(b) Upon receipt,
Dominique deposits each coupon and the redemption amount in an account earning 6%.
Find the lowest yield that Diminique may receive during the ten-year period and also the
highest.6.9:2Drew purchases a new $20,000 9% twelve-year bond with semiannual
coupons. If held to maturity, the redemption payment is $18,500, and the bond would yield
Mr. Jefferson 8% convertible semiannually. The bond has an American option and is callable
beginning at three years from issue. If the bond is called at time T, where T is measured in
coupon periods, the call premium is p(T). Find an expression for the amount p(T) so that
2. Mr. Jefferson yield is 8% no matter when the bond is called.6.9:3Sofia purchases a $6,000
7% eight-year par-value bond with annual coupons. If held to maturity, her yield is 6.6%.
The bond is callable at the end of two years for $6,300 and at the end of years five, six, and
seven for $6,200.(a) Find sofia’s minimal yield for the period she holds the bond.(b) If the
bond is called prior to maturity, Sofia has made arrangements to have the redemption
amount accumulate in her i=5.5% savings account until the end of the eight years. What is
her minimal yield for the eight-year period of the bond? (Coupons are not reinvested.)
