Week 3 Interest Rates and Bond Valuation – Walmart Stores Inc. Excel sheet This assignment covers material in Chapter 7, specifically problems concerning i

Week 3 Interest Rates and Bond Valuation – Walmart Stores Inc. Excel sheet This assignment covers material in Chapter 7, specifically problems concerning interest rates and bond valuation. 21 questions Use an Excel sheet to work out your problems and record your solutionsSubmit an Excel sheet Essentials of Finance
Week 3 Assignment
WAL-MART STORES INC
Coupon Rate 3.300%
Symbol
Maturity Date 04/22/2024
CUSIP
Next Call Date
01/22/2024
Callable
Yes
Last Trade Price
Last Trade Yield
Last Trade Date
US Treasury Yield
$106.18
2.512%
04/09/2015
—
Credit and Rating Elements
Moody’s Rating
Aa2 (04/21/2014)
Standard & Poor’s Rating
AA (04/16/2014)
Fitch Rating
AA (09/30/2014)
Coupon Payment Frequency
Semi-Annual
Refer to the table above to answer Questions 1 through 8.
1. How much is the coupon?
2. This WMT bond is callable. This means that when the interest rate increases, Wal-Mart
might call this bond back from bondholders. True _____ False _____
3. Moody’s rating of this bond is Aa2. Assume that GE’s bond rating is A. JEA’s rating is B+.
Treasury bond’s rating is AAA. Rank the risk of the four bonds from low to high.
4. Calculate the current yield based on the above table.
5. Imagine that the interest rate has increased to 4%. Calculate the new bond price for
semi-annual, with a coupon rate of 3.3%, and 9 years left.
6. Imagine that the interest rate has increased to 4%. Calculate the new bond price for
annual, with a coupon rate of 3.3%, and 9 years left.
FIN 500: Essentials of Finance, Week 3 Assignment
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7. Imagine that the price is $850. Calculate the new yield to maturity for semi-annual,
with a coupon rate of 3.3%, and 9 years left.
8. Imagine that the price is $850. Calculate the new yield to maturity for annual, with a
coupon rate of 3.3%, and 9 years left.
Answer the following questions based on the information provided in the question.
9. Firm AAA’s bonds price is $850. Coupon rate is 5% and par is $1,000. The bond has six
years to maturity. Calculate for current yield.
10. For a zero coupon bond, use the following information to calculate its yield to maturity.
Years left to maturity = 10 years. Price = $250.
11. For a zero coupon bond, use the following information to calculate its price. Years left
to maturity = 10 years. Yield = 8%.
12. Imagine that an annual coupon bond’s coupon rate is 5% with 15 years left to maturity.
Draw the price-yield profile. (Hint: change interest rate, calculate new price and draw
the graph.)
13. IBM’s 5-year 2% annual coupon bond is selling for $950. How much this IBM bond’s
yield to maturity?
14. IBM’s 10-year 4% semi-annual coupon bond is selling for $950. How much is this IBM
bond’s yield to maturity?
15. IBM’s M 10-year 5% annual coupon bond offers 8% of return. What is the price of this
bond?
16. IBM’s 5-year 5% semi-annual coupon bond offers 8% of return. What is the price of this
bond?
17. IBM’s 20-year zero coupon bond offers 8% return. What is the price of this bond?
18. Collingwood Homes has a bond issue outstanding that pays an 8.5% coupon and
FIN 500: Essentials of Finance, Week 3 Assignment
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matures in 18.5 years. The bonds have a par value of $1,000 and a market price of
$964.20. Interest is paid semiannually. What is the yield to maturity?
19. Grand Adventure Properties offers a 9.5% coupon bond with annual payments. The
yield to maturity is 11.2% and the maturity date is 11 years from today. What is the
market price of this bond if the face value is $1,000?
20. The zero coupon bonds of D&L Movers have a market price of $319.24, a face value of
$1,000, and a yield to maturity of 9.17%. How many years is it until these bonds
mature?
21. The bonds issued by Stainless Tubs bear a 6% coupon, payable semiannually. The bonds
mature in 11 years and have a $1,000 face value. Currently, the bonds sell for $989.
What is the yield to maturity?
FIN 500: Essentials of Finance, Week 3 Assignment
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