# Orkney House is issuing bonds

 Orkney House isissuing bonds paying \$62 per year but paid semianaully that willmature 13 years from today. The bond is currently selling for \$975for a face of \$1,000. Calculate:
 a) Coupon rate b) Current yield c) The yield to maturity d) The market price of thebond if the market rates for bonds of equal risk changed to5%.

 Using financial calculator BA II Plus – Inputdetails: # FV = Future Value = \$1,000.00 PV = Present Value = -\$975.00 N = Total number of periods = Years x frequency of coupon = 26 PMT = Payment = Coupon / frequency of coupon = \$31.00 CPT > I/Y = Rate or YTM Semiannual = 3.2438

a.      Coupon rate = PMT x 2 / FV = 31 x 2 / 1000 =6.20%

b.      Current Yield = PMT x 2 / PV = 31 x 2 / 975 =6.36%

c.      Convert Yield in annual and percentage form = YTM = Yield / 100*2 =6.49%

d.      New Market Price of the bond = \$1,113.70 (workingbelow)

 Using financial calculator BA II Plus – Inputdetails: # I/Y = Rate or yield / 2 = 2.50 PMT = Payment /2 = -\$31.00 N = Total number of remaining periods = 26 FV = Future Value = -\$1,000.00 CPT > PV = Bond Value = \$1,113.70

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