You go to the Wall Street Journal today and see the following:
Bonds Cr Yld. Close Par
DukeEn 7½ 25 7.9 94 ½ 100%
BM 7½ 17 7.5 100 3/8 100%
GMA 8 ¼ 14 8.3 105 100%
a. Which bond sells at the highest premium?
b. Which is a discount bond?
c. Which bond is selling closest to par?
d. What is the yield to maturity of the Duke Energy bond? (Assume interest is paid semi-annually. Also assume the bonds mature at exactly the day of the month in the future).
e. How do you explain the difference between the current yield and the yield to maturity of the Duke Energy bond?
f. Which bond reaches maturity at the earliest date?
g. If a U.S Treasury security maturing in 6 years is trading at 350 basis points below the IBM bond, what is the YTM of the U.S. Treasury bond?