Please Answer! YTM & Price

Question

On December 20, 1994 the Nippon Telegraph & Telephone Corporation (NTT) issued ¥1 billion of 10-year debentures due December 20, 2004. The debentures carried a 4 3/4% coupon. They were priced at par, that is, they cost the investor ¥100 per ¥100 of face value. The entire amount of borrowed principal would be repaid at maturity. Interest would be paid annually upon the anniversary date of the issuance (i.e., on December 20th of each year). The debentures carried a AAA credit rating.

A. What was the yield to maturity of NTT’s debentures at the time of issuance? What would it have been if the bonds were priced at 99 instead of 100 (i.e., at 99% of face value)? at 101 instead of 100?

B. By 1996 yields on AAA yen debt maturing in 8 years had dropped to 3.00%. Given this yield to maturity, at what price should the NTT debentures have been selling?

Answer 1

For A Tables kinda hoky but you should be able to recreate in Excel. For be reduce the number of coupons to 8 and discount the coupons and the bullet at 3% to determine the PV of all cash flows

Price	1000.00	1010.00	990.02
PV Coupon	PV Bullet	PV Coupon	PV Bullet	PV Coupon	PV Bullet
371.2765	628.7235	373.595	636.4094	368.956	621.0625
Cash Flow	YTM	4.75%	4.6228%	4.8785%
Year	Coupon	Bullet	Coupon	Bullet	Coupon	Bullet	Coupon	Bullet
1	47.5	0	45.3461	0	45.4012	0	45.2905	0
2	47.5	0	43.2898	0	43.3951	0	43.1838	0
3	47.5	0	41.3268	0	41.4777	0	41.1751	0
4	47.5	0	39.4528	0	39.6450	0	39.2598	0
5	47.5	0	37.6637	0	37.8933	0	37.4336	0
6	47.5	0	35.9558	0	36.2189	0	35.6923	0
7	47.5	0	34.3254	0	34.6186	0	34.0321	0
8	47.5	0	32.7689	0	33.0889	0	32.4490	0
9	47.5	0	31.2829	0	31.6269	0	30.9397	0
10	47.5	1000	29.8644	628.7235	30.2294	636.4094	29.5005	621.0625