Answer:
To fill in the missing data, we can use the provided information and some basic bond calculations.
For the AOL Coupon Bond:
- Face Value (Par): $1,000
- Yield to Maturity: 9.5%
- Years to Maturity: 20
- Price: $689.15
Now, we need to find the coupon rate for the AOL Coupon Bond.
Using the bond pricing formula:
\[ P = \frac{C}{(1 + r)^n} + \frac{FV}{(1 + r)^n} \]
where:
- \( P \) is the price of the bond ($689.15)
- \( C \) is the semiannual coupon payment
- \( r \) is the yield to maturity (in decimal form, so 9.5% becomes 0.095)
- \( n \) is the total number of periods (in this case, 20 years means 40 periods since it's semiannual)
The face value is $1,000.
We can solve for \( C \):
\[ 689.15 = \frac{C}{(1 + 0.095)^{40}} + \frac{1000}{(1 + 0.095)^{40}} \]
Using the calculator, solve for \( C \). Once we have \( C \), we'll get the coupon rate by dividing it by the face value and then multiplying by 2 (since it's semiannual).
For the IBM Coupon Bond:
- Face Value (Par): $1,000
- Coupon Rate: 9.5%
- Yield to Maturity: 7.5%
- Years to Maturity: 10
- Price: We need to calculate it.
We'll use the bond pricing formula again to find the price of the IBM Coupon Bond.
\[ P = \frac{C}{(1 + r)^n} + \frac{FV}{(1 + r)^n} \]
This time, we know the coupon rate is 9.5%, so we can use it directly along with the yield to maturity and years to maturity to calculate the price.
Once we have all the values filled in, we'll have the complete information for both bonds.
