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Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6%. You hold the bond for five years before selling Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is a you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually Given Data section. a. If the bond's yield to maturity is 6% when you sell it, what is the internal rate of return of your investment? b. If the bond's yield to maturity is 7% when you sell it, what is the internal rate of return of your investment? c. If the bond's yield to maturity is 5% when you sell it, what is the internal rate of return of your investment? d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures?

Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6%. You hold the bond for five years before selling Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is a you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually Given Data section. a. If the bond's yield to maturity is 6% when you sell it, what is the internal rate of return of your investment? b. If the bond's yield to maturity is 7% when you sell it, what is the internal rate of return of your investment? c. If the bond's yield to maturity is 5% when you sell it, what is the internal rate of return of your investment? d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures?

Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter11: Bond Pricing And Amortization (bonds)
Section: Chapter Questions
Problem 8R: a. Reset the Data Section to its initial values. The price of this bond is 1,407,831. What would it...
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Problem 6-14 Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6%. You hold the bond for five years before selling it. Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section. a. If the bond's yield to maturity is 6% when you sell it, what is the internal rate of return of your investment? b. If the bond's yield to maturity is 7% when you sell it, what is the internal rate of return of your investment? c. If the bond's yield to maturity is 5% when you sell it, what is the internal rate of return of your investment? d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Years to maturity Years held Coupon Par value Yield to maturity 30 5 $0 Price at original issue Years left to maturity a. If the bond's yield to maturity is 6% when you sell it, what is the internal rate of return of your investment? New yield to maturity Price when sold Internal rate of return Price when sold Internal rate of return $1,000 6% b. If the bond's yield to maturity is 7% when you sell it, what is the internal rate of return of your investment? New yield to maturity Price when sold Internal rate of return 6% 7% c. If the bond's yield to maturity is 5% when you sell it, what is the internal rate of return of your investment? New yield to maturity 5% d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Even without default, if you sell prior to maturity, you to the risk that the YTM may change.
Transcribed Image Text:Problem 6-14 Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6%. You hold the bond for five years before selling it. Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section. a. If the bond's yield to maturity is 6% when you sell it, what is the internal rate of return of your investment? b. If the bond's yield to maturity is 7% when you sell it, what is the internal rate of return of your investment? c. If the bond's yield to maturity is 5% when you sell it, what is the internal rate of return of your investment? d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Years to maturity Years held Coupon Par value Yield to maturity 30 5 $0 Price at original issue Years left to maturity a. If the bond's yield to maturity is 6% when you sell it, what is the internal rate of return of your investment? New yield to maturity Price when sold Internal rate of return Price when sold Internal rate of return $1,000 6% b. If the bond's yield to maturity is 7% when you sell it, what is the internal rate of return of your investment? New yield to maturity Price when sold Internal rate of return 6% 7% c. If the bond's yield to maturity is 5% when you sell it, what is the internal rate of return of your investment? New yield to maturity 5% d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Even without default, if you sell prior to maturity, you to the risk that the YTM may change.
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