Posted: November 5th, 2022

Calculate the value of the bond if your required return is 5 percent

Week 4 assignment 3

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You are given the following data on bonds from AT&T, Dell, and IBM. Each bond has a par value of $1000.

 

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AT&T

 

Dell

 

IBM

 

Coupon

 

6.80

 

6.50

 

8.375%

 

Maturity

 

05/15/2036

 

04/15/2038

 

11/01/2019

 

Frequency

 

Semiannual

 

Semiannual

 

Semiannual

 

Rating

 

A

 

A-

 

A+

 

1.    Calculate the value of the bond if your required return is 5 percent on  AT&T, 6.5 percent on Dell, and 8 percent on IBM.

 

2.    Determine the yield to maturity (YTM) on the bonds given the following prices. 

 

 

AT&T

 

Dell

 

IBM

 

Price

 

$1,060.00

 

$1,016.57

 

$1,307.78

 

3.    Based on each bond’s ratings and your determination of its yield to maturity explain how you rank each bond for risk and return.

 

 

  1. Assume you had $10,000 to invest.  How many of each bond would you have? What dollar amount of interest would each bond return on the investment for the next year? What would your percentage return be for the year, that is, your interest payments divided by the total amount invested? You must submit your backup in Excel or other supporting documentation showing how answers were reached.

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