One railroad bond priced at 935.77, then pushed by rates and by time, with each move worked in full for a Unit 6 bond valuation exercise in MT217. Searches like "mt 217 unit 6 assignment example", "mt217 unit 6 sample" and "mt217 unit 6 example" land here.
What a finished MT217 Unit 6 bond valuation exercise looks like
Three parts on about four pages. Part one prices a 1,000-dollar bond paying 6.2 percent a year in semiannual coupons of 31.00, with 12 years to maturity, at a 7.0 percent market yield: the coupons are worth 497.81 and the face value 437.96, for a price of 935.77 and a current yield of 6.63 percent. Part two moves the yield: at 6.0 percent the price rises to 1,016.94, above face, and at 8.0 percent it falls to 862.78. Part three moves time instead. Holding the yield at 7.0, the price climbs to 951.62 with eight years left, 972.50 with four and 992.40 with one. A final comparison shows a one-point rise cutting a 3-year bond by 2.64 percent and a 20-year bond by 10.14 percent.
How a MT217 Unit 6 example is structured
The exercise separates the bond into its two streams before combining them, because a reader who sees coupons and face value priced apart understands why the total sits below par. Semiannual conventions are stated at the top: coupon halved to 31.00, yield halved to 3.5 percent, 24 periods. Each part then asks one question and changes one thing, first the yield, then the years remaining, then the maturity of the bond itself, so every price movement has a single cause. Results appear in short tables, and each table ends with a sentence on direction and size, stating how many dollars the price moved and why that input moved it. The closing paragraph draws two conclusions in plain terms: prices move opposite to yields, and longer bonds move further for the same change in yields.
Coupons and face, priced apart
Twenty-four coupons of 31.00 are worth 497.81 and the 1,000 at maturity 437.96, which together explain the 935.77 price.
Semiannual, stated once
The coupon, the yield and the period count are halved or doubled together at the top, and the rest of the exercise inherits them.
Yields up, price down
Moving the market yield from 6.0 to 8.0 percent swings the price from 1,016.94 to 862.78, crossing par once the yield passes the coupon.
Drifting toward par
With yields held at 7.0 percent, the price rises year by year to 992.40 one year out, the discount shrinking as maturity nears.
Long bonds move further
A one-point rise costs the 3-year bond 2.64 percent and the 20-year bond 10.14 percent, the exercise's closing evidence on interest rate risk.
Where marks go in MT217 Unit 6
Semiannual conventions trip up more of these exercises than anything else: an annual coupon of 62 discounted over 12 periods at 7 percent gives a price close enough to look right and still wrong. Treating the coupon rate as the discount rate produces a price of par every time, which misses the point of the unit. Many sections deduct for quoting current yield as though it were the bond's full return. Price changes reported without saying which input changed make the second half of the exercise impossible to follow. A comparison of short and long bonds that uses different coupons confounds two effects. Repricing that reuses the original setup reads better than a fresh start, since recomputing from scratch invites a new slip. Each result needs its basis, dollars or percent of face.
Get a MT217 Unit 6 example written to your instructions
Upload the Unit 6 bond problems with their terms, the rubric and whether semiannual or annual conventions apply. Each bond is priced from its two streams, then repriced as yields and time change, every move explained in a sentence. Initial samples carry no charge, and 24-48h is the normal turnaround.
MT217 Unit 6 questions, answered
Why is the bond priced below 1,000?
Because its 6.2 percent coupon pays less than the 7.0 percent the market currently requires. A buyer accepts the lower coupon only at a lower price, and the discount makes up the difference by maturity. If market yields fell below 6.2 percent, the same bond would sell above 1,000, which the sample shows at a 6.0 percent yield.
Do I have to use semiannual periods?
Semiannual coupons are the norm for corporate issues in this country, so textbook problems tend to assume them unless the wording says otherwise. Read the problem statement first. The sample states its convention at the top and applies it throughout. Mixing conventions within one answer, an annual yield with semiannual coupons, is a common source of lost points.
What is the pull to par?
The tendency of a bond's price to approach its face value as maturity nears, when yields hold steady. A discount bond rises and a premium bond falls, because fewer coupons remain to make up the difference between coupon and market rate. The sample shows the railroad bond climbing from 935.77 to 992.40 with one year left.