#10. Bond A and bond B both pay annual coupons, mature in 8 years, have a face value of $1000,
pay their next coupon in 12 months, and have the same yield-to-maturity.
Bond A has a coupon
rate of 6.5 percent and is priced at $1,050.27.
Bond B has a coupon rate of 7.4 percent.
What is the
price of bond B?
A. $1,106.83 (plus or minus $4)
B. $995.63 (plus or minus $4)
C. $1,050.27 (plus or minus $4)
D. $1,000.00 (plus or minus $4)
E. None of the above is within $4 of the correct answer
Approach: Find YTM of bond A and use it to compute price of bond B, since they have the
same YTM
YTM of bond A:
N = 8 years × 1 coupon per year = 8
PV = -1,050.27
PMT = par × coupon rate ÷ # coupons per year = 1000 × 6.5% ÷ 1 = 65
FV = 1000
END mode
Enter
8
-1,050.27
65
1000
N
I%
PV
PMT
FV
Solve for
5.70
I% = YTM ÷ # coupons per year = YTM ÷ 1
So YTM = I% × # coupons per year = 5.70% × 1 = 5.70%
YTM for bond A = 5.70 percent, so for bond B
N = 8 years × 1 coupon per year = 8
I% = YTM ÷ # coupons per year = 5.70 ÷ 1 = 5.70
PMT = par × coupon rate ÷ # coupons per year = 1000 × 7.4% ÷ 1 = 74.00
FV = 1000
END mode
Enter
8
5.70
74
1000
N
I%
PV
PMT
FV
Solve for
-1,106.83
The value of bond B is $1,106.83 (answer may differ slightly due to rounding I%)

#11. Bonds issued by Mindy’s Mending have a par value of $1000, were priced at $1,220.00 six
months ago, and are priced at $1,140.00 today.
The bonds pay semi-annual coupons and just
made a coupon payment.
If the bonds had a percentage return over the past 6 months (from 6
months ago to today) of -2.10%, then what is the current yield of the bonds today?