In this GF540 Unit 4 bond pricing exercise, three composite bonds are priced and every yield measure is reported, down to yield to worst on a callable premium issue. Searches like "gf 540 unit 4 assignment example", "gf540 unit 4 sample" and "gf540 unit 4 example" land here.
What a finished GF540 Unit 4 bond pricing exercise looks like
A worked exercise in three blocks, one per instrument, each opening with a term sheet. The first bond pays a 5.4 percent coupon semiannually for eight years and trades where comparable debt yields 6.2 percent, so it prices at 950.14 per 1,000 of face value with a current yield of 5.68 percent. The second is a premium issue: a 6.8 percent coupon, twelve years to maturity, quoted at 1,064.50 and callable in four years at 1,025. Its yield to maturity solves to 6.04 percent on a bond-equivalent basis, 6.13 percent as an effective annual rate, while its yield to call is 5.55 percent, which becomes the yield to worst. The third, a five-year zero, prices at 751.36 at a 5.8 percent yield. A settlement example adds accrued interest of 9.05 to the first bond.
How a GF540 Unit 4 example is structured
Every block follows the same order so the yield measures can be compared across instruments. The term sheet lists face value, coupon rate, payment frequency, maturity, any call schedule and the market yield or price supplied. Price comes next where a yield is given, or yield where a price is given, with the per-period rate and number of periods stated before any calculation. Each yield measure then gets its own line: a definition in a clause, the computation, the result and one sentence on what the measure assumes, such as reinvestment at the same rate or the bond being held to its call date. The callable block adds a short comparison explaining why the call caps upside for a premium bond. A closing note separates the clean quote from the invoice price and states the day count convention the prompt specifies.
Term sheet before arithmetic
Coupon, frequency, maturity, call date and call price are listed for each instrument, so a reader can check the per-period rate and period count against the source terms.
Discount, premium, zero
The three instruments were chosen to show a price below par, a price above par and a bond with no coupons, each behaving differently when yields move.
Why the call decides the yield
For the premium callable, yield to call falls below yield to maturity, so the exercise reports 5.55 percent as yield to worst and explains why the issuer would redeem.
Bond-equivalent against effective
Semiannual yields are doubled by market convention, and the exercise converts 6.04 percent to its 6.13 effective annual equivalent so the two are never confused.
Clean quote, invoice price
Accrued interest of 9.05, earned by the seller over 61 days of a 182-day coupon period, is added to the quoted price to reach what the buyer pays.
Where marks go in GF540 Unit 4
Pricing exercises are marked on conventions as much as on arithmetic. Most often the loss comes from applying an annual yield to semiannual coupons, which leaves the price wrong by a margin that looks plausible. Current yield offered as though it were the return an investor earns draws a deduction, since it ignores the gain or loss to maturity. On callable bonds, reporting yield to maturity alone for a premium issue overstates what a buyer can expect, and graders look for yield to worst. Bond-equivalent and effective annual yields mixed in one comparison produce rankings that are not like for like. A price quoted without saying whether accrued interest is included leaves the settlement question open. Answers without the per-period rate and period count shown earn little method credit when a figure is off.
Get a GF540 Unit 4 example written to your instructions
Your GF540 Unit 4 bond terms, whatever yields or prices were supplied and the rubric are all the exercise needs, plus a note if your instructor wants calculator keystrokes or spreadsheet functions shown. Each instrument is priced and every requested yield reported with its assumption stated. Nothing is billed for a first custom sample, and delivery usually takes 24-48h.
GF540 Unit 4 questions, answered
Why does my bond have a yield to call and a yield to maturity?
Because a callable bond might be redeemed early, and each yield assumes a different end date. When the bond trades above par, the issuer has reason to call it once rates allow, so the yield to call is usually the realistic figure. The sample reports both and names the lower one as yield to worst, which is the conservative measure most prompts expect you to quote.
Do I need to show accrued interest?
If the prompt gives a settlement date between coupon payments, yes. Bonds are quoted clean, without the interest the seller has earned since the last coupon, and the buyer pays that interest on top. The sample computes it from the day count your prompt specifies and shows the quoted and invoice prices side by side, so there is no doubt about which figure answers the question.
Is the zero-coupon bond just a present value problem?
Mechanically, yes: one payment at maturity discounted at the periodic yield. What earns credit is the interpretation. The sample notes that a zero carries no reinvestment risk before maturity and that its price moves more for a given yield change than a coupon bond of the same maturity, which sets up the duration work that usually follows.