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CSM Corporation has issued a $1,000 par value bond with a 6% coupon rate paid semiannually and 15 years remaining to maturity. The bond is currently trading at $874.42. Spreadsheets were created to: (a) Calculate the bond's current yield to maturity of 3.70% (b) Show that if the yield to maturity increases to 5.70%, the price decreases (c) Show that if the yield to maturity decreases to 1.70%, the price increases (d) In general, the price of the bond is inversely related to the yield to maturity - as yield increases, price decreases, and vice versa. The coupon rate and

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242 views2 pages

XLSX

CSM Corporation has issued a $1,000 par value bond with a 6% coupon rate paid semiannually and 15 years remaining to maturity. The bond is currently trading at $874.42. Spreadsheets were created to: (a) Calculate the bond's current yield to maturity of 3.70% (b) Show that if the yield to maturity increases to 5.70%, the price decreases (c) Show that if the yield to maturity decreases to 1.70%, the price increases (d) In general, the price of the bond is inversely related to the yield to maturity - as yield increases, price decreases, and vice versa. The coupon rate and

Uploaded by

christiewijaya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Spreadsheet Exercise

CSM Corporation has a bond issue outstanding at the end of 2015. The bond has 12/31/2015
15 years remaining to maturity and carries a coupon interest rate of 6%. Interest on 12/31/2030
the bond is compounded on a semiannual basis. The par value of the CSM bond is
$1,000, and it is currently selling for $874.42.

To Do
Create a spreadsheet similar to the Excel spreadsheet examples located in the chapter
for yield to maturity and semiannual interest to model the following:
a. Create a spreadsheet similar to the Excel spreadsheet examples located in the
chapter to solve for the yield to maturity.
b. Create a spreadsheet similar to the Excel spreadsheet examples located in the
chapter to solve for the price of the bond if the yield to maturity is 2% higher.
c. Create a spreadsheet similar to the Excel spreadsheet examples located in the
chapter to solve for the price of the bond if the yield to maturity is 2% lower.
d. What can you summarize about the relationship between the price of the bond,
the par value, the yield to maturity, and the coupon rate?

CSM Corporation
Solving for yield to maturity and price of a semi-annually paying bond

(a.) YIELD TO MATURITY, SEMI ANNUAL INTEREST


Coupon interest rate 6% FV 1000
Par value $1,000 PV -874.42
Semi annual interest Payment $30 NPER 30
Number of years to maturity 15 PMT 30
Number of periods to maturity 30 3.70% Rate
Current bond price -874.42
Yield to Maturity 3.70%

(b.) BOND VALUE, SEMI ANNUAL INTEREST


Coupon interest rate 6% $599.58
Par value $1,000 $430.40
Semi annual interest Payment $30 $1,029.98
Number of years to maturity 15
Number of periods to maturity 30
Yield to Maturity 5.70%
Current bond price $ 1,029.98

(c.) BOND VALUE, SEMI ANNUAL INTEREST


Coupon interest rate 6% $791.46
Par value $1,000 $775.75
Semi annual interest Payment $30 $1,567.21
Number of years to maturity 15
Number of periods to maturity 30
Yield to Maturity 1.70%
Current bond price $ 1,567.21

(d.)

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