Coupon Yield on the Bond Assignment | Homework For You

Once upon a time, the treasurer of “Mighty Corporation” (MCO) decided to issue a bond (hereafter: The bondThe bond would have a 20-year life and promised that the holder of the bond would receive:Homework For You

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  • 20 annual payments of $80,
  • Along with the 20th payment, MCO promised to return the principal of $1,000. In other words, the final payments received at maturity would be ($1000+$80) = $1080.

The bond is bought by an insurance company. One year passes, the bond has made its first coupon payment, and the interest rate/yield-to-maturity on the bondfalls to 6%.

  • A) What is the Coupon Yield on the bond?
  • B) The bond now has 19 years left. Calculate the Macaulay duration of the bond. Show your work on the “Duration” spreadsheet tab. (Do the full calculation, I will not accept an answer from a duration calculator or the duration functions in Excel.) Get Finance homework help today

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