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 Chapter 07 – Valuing Bonds

CHAPTER 7 – VALUING BONDS

questions

LG1 1. What does a call provision allow issuers to do, and why would they do it?

A call provision on a bond issue allows the issuer to pay off the bond debt early at a cost of the
principal plus any call premium. Most of the time when a bond issue is called, it is because
interest rates have substantially declined in the economy. The issuer calls the existing bonds
and issues new bonds at the lower interest rate. This reduces the interest payments the issuer
must pay each year.

LG2 2. List the differences between the new TIPS and traditional Treasury bonds.

Traditional Treasury bonds have a fixed principal and constant interest payments. Because the
principal and coupon rate are fixed, interest rate changes in the economy cause the market price
of the bonds to have large fluctuations. On the other hand, the principal of a TIPS increases with
the rate of inflation. Similar to a T-bond, the TIPS has a constant coupon rate. However, since
the principal of the TIPS increases over time, the interest payment also increases over time. This
inflation rate adjustment of a TIPS’ principal every six months reduces the amount of downward
price change in the price of the bond when interest rates increase.

LG2 3. Explain how mortgage-backed securities work.

A large amount of home mortgages are purchased and pooled together. The homeowners pay
interest and principal monthly on their mortgages. Bonds are issued from the pool of mortgages,
using the mortgages as collateral. The interest payments and bond principal payments for these
mortgage-backed securities (MBS) originate from the mortgage borrowers and flow through the
pool of mortgages. As the homeowners pay off their mortgages over time, the MBS are also paid.

LG3 4. Provide the definitions of a discount bond and a premium bond. Give examples.

A discount bond is simply a bond that is selling below its par value. It would be quoted at a price
that is less than 100 percent of par, like 99.05. A premium bond is a bond selling above its par
value. Its price will be quoted as over 100 percent of par value, like 101.15. A bond becomes a
discount bond when market interest rates rise above the bond’s coupon rate. A bond becomes a
premium bond when market interest rates fall below the bond’s coupon rate.

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 Chapter 07 – Valuing Bonds

LG4 5. Describe the differences in interest payments and bond price between a 5 percent coupon bond
and a zero coupon bond.

The 5 percent coupon bond pays annual interest of 5 percent of the bond’s par value. For a
$1,000 par value bond, this would be $50 per year. This interest might be paid in two payments
of $25 each. The price of the coupon bond tends to stay near its par value. The zero coupon bond
pays no interest payments. The bondholder earns a return from the increase of the bond’s market
price over time. The bond’s price is initially much lower than its par value. When the zero
coupon bond finally matures, the par value is paid.

LG5 6. All else equal, which bond’s price is more affected by a change in interest rates, a short-term
bond or a longer-term bond? Why?

All else equal, a long-term bond experiences larger price changes when interest rates change than
a short-term bond. A bond’s price is the present value of all its cash flows. Changes in the
discount rate (the interest rate) impact present values more for cash flows that are further out in
time.

LG5 7. All else equal, which bond’s price is more affected by a change in interest rates, a bond with a
large coupon or a small coupon? Why?

The price of the bond with the small coupon will be impacted more by a change in interest rates
than the price of the large coupon bond. For a small coupon bond, the cash flows are weighted
much more toward the maturity date because of the small interest payments. The large coupon
bond has high interest payments, many of which occur soon. These higher cash flows made
earlier dampen the impact of interest rate changes because those changes in the discount rate
impact the earlier cash flows to a lesser degree than the later cash flows.

LG5 8. Explain how a bond’s interest rate can change over time even if interest rates in the economy
do not change.

Because of the yield curve, there are different interest rates that apply to each time to maturity.
So, as a bond gets closer to its maturity date, different interest rates may apply to its discounting
even when interest rates in the economy have not changed.

LG6 9. Compare and contrast the advantages and disadvantages of the current yield computation
versus yield to maturity calculations.

The current yield computation is useful because it is a very simple one. It provides a quick and
easy assessment of what the bond offers the investor in return. But it measures only the return
from the interest payments. The full return to an investor also includes the capital gain or loss the
bond will experience if it is selling as a discount or premium bond. The yield to maturity
computation is more difficult, but it incorporates the full return the bond offers to investors.

7-2
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 Chapter 07 – Valuing Bonds

LG6 10. What is the yield to call and why is it important to a bond investor?

Many bonds do not survive until their maturity date because they get paid early through a call
provision. The yield to call is the yield that would be earned if the bond is purchased at today’s
price and held until it is called by the issuer. The computation incorporates the additional call
premium that is paid with the principal.

LG6 11. What is the purpose of computing the equivalent taxable yield of a municipal bond?

Municipal bonds offer a tax advantage for the bondholder that other kinds of bonds do not offer.
Thus, their yield to maturity is not directly comparable to that of other bonds. The equivalent
taxable yield (ETY) is an adjustment to the yield to make it comparable to taxable bonds. Bond
investors can use the ETY to assess which bond will earn them a higher after-tax return.

LG6 12. Explain why high income and wealthy people are more likely to buy a municipal bond than a
corporate bond.

Individual bondholders do not owe taxes on interest payments received from municipal bonds.
This tax advantage is more valuable to individuals who are in a higher marginal tax bracket.
Because wealthy individuals are usually in a higher tax bracket, this tax advantage is more
valuable to them.

LG7 13. Why does a Treasury bond offer a lower yield than a corporate bond with the same time to
maturity? Could a corporate bond with a different time to maturity offer a lower yield? Explain.

The Treasury bond has lower credit risk than the corporate bond. Given the risk/return
relationship, lower risk is associated with lower expected return. Thus, all else equal, a Treasury
bond will offer a lower yield to maturity than a corporate bond. However, if the yield curve
slopes upward, then shorter term to maturity bonds will require a smaller interest rate than longer
term bonds. So, it is possible that a short-term corporate bond would offer a lower yield than a
long-term Treasury bond.

LG7 14. Describe the difference between a bond issued as a high-yield bond and one that has become
a “fallen angel.”

Both of these bonds would be rated as BB or below. The bond referred to as a “fallen angel”
would have been issued by a firm that was a successful, financially stable firm but one that has
recently struggled. The bondholder would have purchased the bond when it was rated investment
grade (BBB or above), but now holds a “fallen angel”, or junk bond, due to a decline in the
issuer’s financial status. The bond issued as a high-yield, or junk, bond would

7-3
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Education.
 Chapter 07 – Valuing Bonds

have been issued after the firm’s financial condition had already deteriorated. The purchaser of
this bond bought the bond initially as a junk bond.

LG8 15. What is the difference in the trading volume between Treasury bonds and corporate bonds?
Give examples and/or evidence.

There is high trading volume in Treasury bonds and low trading volume in corporate bonds.

problems

basic problems

LG1 7-1 Interest Payments Determine the interest payment for the following three bonds: 3.5
percent coupon corporate bond (paid semiannually), 4.25 percent coupon Treasury note,
and a corporate zero coupon bond maturing in ten years. (Assume a $1,000 par value.)

3.5 percent coupon corporate bond (paid semiannually): 0.5 × 0.035 × $1,000 = $17.50
4.25 percent coupon Treasury note: 0.5 × 0.0425 × $1,000 = $21.25
Corporate zero coupon bond maturing in 10 years: 0.00 × $1,000 = $0

LG1 7-2 Interest Payments Determine the interest payment for the following three bonds: 4.5percent
coupon corporate bond (paid semiannually), 5.15 percent coupon Treasury note, and a corporate
zero coupon bond maturing in 15 years. (Assume a $1,000 par value.)

4.5 percent coupon corporate bond (paid semiannually): 0.5 × 0.045 × $1,000 = $22.50
5.15 percent coupon Treasury note: 0.5 × 0.0515× $1,000 = $25.75

Corporate zero coupon bond maturing in 10 years: 0.00 × $1,000 = $0

LG1 7-3 Time to Maturity A bond issued by Ford on May 15, 1997 is scheduled to mature on May
15, 2097. If today is November 16, 2014, what is this bond’s time to maturity?

May 15, 2097 minus November 16, 2014 = 82 years and 6 months

LG1 7-4 Time to Maturity A bond issued by IBM on December 1, 1996 is scheduled to mature on
December 1, 2096. If today is December 2, 2015, what is this bond’s time to maturity?

December 1, 2096 minus December 2, 2015 = 81 years

LG1 7-5 Call Premium A 6 percent corporate coupon bond is callable in five years for a call
premium of one year of coupon payments. Assuming a par value of $1,000, what is the price
paid to the bondholder if the issuer calls the bond?

Principal + Call premium = $1,000 + 0.06 × $1,000 = $1,060

7-4
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 Chapter 07 – Valuing Bonds

LG1 7-6 Call Premium A 5.5 percent corporate coupon bond is callable in 10 years for a call
premium of one year of coupon payments. Assuming a par value of $1,000, what is the price
paid to the bondholder if the issuer calls the bond?

Principal + Call premium = $1,000 + 0.055 × $1,000 = $1,055

LG2 7-7 TIPS Interest and Par Value A 2.75 percent TIPS has an original reference CPI of 185.4.
If the current CPI is 210.7, what is the current interest payment and par value of the TIPS?

Par value = 210.7 / 185.4 × $1,000 = $1,136.46

Interest payment = 0.5 × 0.0275 × $1,136.46 = $15.63

LG2 7-8 TIPS Interest and Par Value A 3.125 percent TIPS has an original reference CPI of 180.5.
If the current CPI is 206.8, what is the current interest payment and par value of the TIPS?

Par value = 206.8 / 180.5 × $1,000 = $1,145.71

Interest payment = 0.5 × 0.03125 × $1,145.71 = $17.90

LG3 7-9 Bond Quotes Consider the following three bond quotes; a Treasury note quoted at 97:27,
and a corporate bond quoted at 103.25, and a municipal bond quoted at 101.90. If the Treasury
and corporate bonds have a par value of $1,000 and the municipal bond has a par value of
$5,000, what is the price of these three bonds in dollars?

Treasury note at 97:27: (97 + 27/32)% × $1,000 = 0.9784375 × $1,000 = $978.44

Corporate bond at 103.25: 103.25% × $1,000 = 1.0325 × $1,000 = $1,032.50
Municipal bond at 101.90: 101.90% × $5,000 = 1.019 × $5,000 = $5,095.00

LG3 7-10 Bond Quotes Consider the following three bond quotes; a Treasury bond quoted at 106:14,
a corporate bond quoted at 96.55, and a municipal bond quoted at 100.95. If the Treasury and
corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000,
what is the price of these three bonds in dollars?

Treasury note at 106:14: (106 + 14/32)% × $1,000 = 1.064375 × $1,000 = $1,064.38

Corporate bond at 96.55: 96.55% × $1,000 = 0.9655 × $1,000 = $965.50
Municipal bond at 100.95: 100.95% × $5,000 = 1.0095 × $5,000 = $5,047.50

LG4 7-11 Zero Coupon Bond Price Calculate the price of a zero coupon bond that matures in 20
years if the market interest rate is 3.8 percent.

Use semiannual compounding:

7-5
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Education.
 Chapter 07 – Valuing Bonds

FVN $1,000
PV = = = $471.01
(1 + i )N  .038 
40

1 + 
 2 
Or N=40, I=1.9, PMT=0, FV=−1000, CPT PV == 471.01

LG4 7-12 Zero Coupon Bond Price Calculate the price of a zero coupon bond that matures in 15
years if the market interest rate is 5.75 percent.

Use semiannual compounding:

FVN $1,000
PV = = = $427.27
(1 + i )  .0575 30
N

1 + 
 2 
Or N=30, I=2.875, PMT=0, FV=−1000, CPT PV == 427.27

LG6 7-13 Current Yield What is the current yield of a 3.8 percent coupon corporate bond quoted at a
price of 102.08?

3.8% / 102.08% = 0.0372 = 3.72%

LG6 7-14 Current Yield What is the current yield of a 5.2 percent coupon corporate bond quoted at a
price of 96.78?

5.2% / 96.78% = 0.05373 = 5.37%

LG6 7-15 Taxable Equivalent Yield What is the taxable equivalent yield on a municipal bond with a
yield to maturity of 3.5 percent for an investor in the 33 percent marginal tax bracket?

Use equation 7.4:

Muni yield 3.5%

Equivalent taxable yield = = = 5.22%
1-Tax rate 1 − 0.33

LG6 7-16 Taxable Equivalent Yield What is the taxable equivalent yield on a municipal bond with a
yield to maturity of 2.9 percent for an investor in the 28 percent marginal tax bracket?

Use equation 7.4:

Muni yield 2.9%

Equivalent taxable yield = = = 4.03%
1-Tax rate 1 − 0.28

LG7 7-17 Credit Risk and Yield Rank from highest credit risk to lowest risk the following bonds,
with the same time to maturity, by their yield to maturity: Treasury bond with yield of 5.55
percent, IBM bond with yield of 7.49 percent, Trump Casino bond with yield of 8.76 percent,
and Banc One bond with a yield of 5.99 percent.
7-6
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Education.
 Chapter 07 – Valuing Bonds

Trump Casino bond with yield of 8.76 percent

IBM bond with yield of 7.49 percent
Banc One bond with yield of 5.99 percent
Treasury bond with yield of 5.55 percent

LG7 7-18 Credit Risk and Yield Rank the following bonds in order from lowest credit risk to highest
risk, all with the same time to maturity, by their yield to maturity: Treasury bond with yield of
4.65 percent, United Airline bond with yield of 9.07 percent, Bank of America bond with a yield
of 6.25 percent, and Hewlett/Packard bond with yield of 6.78 percent.

Treasury bond with yield of 4.65 percent

Bank of America bond with yield of 6.25 percent
Hewlett/Packard bond with yield of 6.78 percent
United Airline bond with yield of 9.07 percent

intermediate problems

LG2 7-19 TIPS Capital Return Consider a 3.5 percent TIPS with an issue CPI reference of 185.6. At
the beginning of this year, the CPI was 193.5 and was at 199.6 at the end of the year. What was
the capital gain of the TIPS in dollars and in percentage terms?

Gain = End of year value – Beginning of year value =

199.6 / 185.6 × $1,000 − 193.5 / 185.6 × $1,000 = $1,075.43 − $1,042.56 = $32.87
As a percentage, the gain was = $32.87 / $1,042.56 = 3.15%

LG2 7-20 TIPS Capital Return Consider a 2.25 percent TIPS with an issue CPI reference of 187.2.
At the beginning of this year, the CPI was 197.1 and was at 203.8 at the end of the year. What
was the capital gain of the TIPS in dollars and in percentage terms?

Gain = End of year value – Beginning of year value =

203.8 / 187.2 × $1,000 − 197.1 / 187.2 × $1,000 = $1,088.68 − $1,052.88 = $35.80
As a percentage, the gain was = $35.80 / $1,052.88 = 3.40%

LG4 7-21 Compute Bond Price Compute the price of a 3.8 percent coupon bond with 15 years left to
maturity and a market interest rate of 6.8 percent. (Assume interest payments are semiannual.) Is
this a discount or premium bond?

 1 
1 − (1 + 0.034 )30  $1,000
Bond Price = $19.00   + = $353 .869 + $366 .762 = $720 .63
  (1 + 0.034 )
30
0.034
 
or TVM calculator: N = 30, I = 3.4, PMT = 19.00, FV = 1000; CPT PV = -720.63
Since the bond’s price is less than $1,000, it is a discount bond.

7-7
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Education.
 Chapter 07 – Valuing Bonds

LG4 7-22 Compute Bond Price Compute the price of a 5.6 percent coupon bond with 10 years left to
maturity and a market interest rate of 7.0 percent. (Assume interest payments are semiannual.) Is
this a discount or premium bond?

 1 
1 − (1 + 0.035)20  $1,000
Bond Price = $28.00   + = $397.95 + $502.56 = $900.51
  (1 + 0.035)
20
0.035
 
 

or TVM calculator: N = 20, I = 3.5, PMT = 28, FV = 1000; CPT PV = -900.51

Since the bond’s price is less than $1,000, it is a discount bond.

LG4 7-23 Compute Bond Price Calculate the price of a 5.2 percent coupon bond with 18 years left to
maturity and a market interest rate of 4.6 percent. (Assume interest payments are semiannual.) Is
this a discount or premium bond?

 1 
1 − (1 + 0.023)36  1,000
Bond Price = $26.00   + = $631.87 + $441.04 = $1,072.91
  (1 + 0.023)
36
0.023
 
 
or TVM calculator: N = 36, I = 2.3, PMT = 26, FV = 1000; CPT PV = -1,072.91
Since the bond’s price is greater than $1,000, it is a premium bond.

LG4 7-24 Compute Bond Price Calculate the price of a 5.7 percent coupon bond with 22 years left to
maturity and a market interest rate of 6.5 percent. (Assume interest payments are semiannual.) Is
this a discount or premium bond?

 1 
1 − (1 + 0.0325 )44  $1,000
Bond Price = $28.50   + = $662 .24 + $244 .81 = $907 .05
  (1 + 0.0325 )
44
0.0325
 

or TVM calculator: N = 44, I = 3.25, PMT = 28.50, FV = 1000; CPT PV = -907.05

Since the bond’s price is less than $1,000, it is a discount bond.

LG5 7-25 Bond Prices and Interest Rate Changes A 5.75 percent coupon bond with 10 years left to
maturity is priced to offer a 6.5 percent yield to maturity. You believe that in one year, the yield
to maturity will be 6.0 percent. What is the change in price the bond will experience in dollars?

Compute the current bond price:

 1 
1 − (1 + 0.0325)20  $1,000
Bond Price = $28.75   + = $418.01 + $527.47 = $945.48
  (1 + 0.0325)
20
0.0325
 
 

7-8
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Education.
 Chapter 07 – Valuing Bonds

or TVM calculator: N = 20, I = 3.25, PMT = 28.75, FV = 1000; CPT PV = -945.48

Now compute the price in one year:

 1 
1 − (1 + 0.029 )18  $1,000
Bond Price = $28.75   + = $398 .777 + $597 .755 = $996 .53
  (1 + 0.029 )
18
0.029
 

or TVM calculator: N = 18, I = 3.0 PMT = 28.75, FV = 1000; CPT PV = -$982.81

So, the dollar change in price is:

$996.53 − $945.48 = $37.33

LG5 7-26 Bond Prices and Interest Rate Changes A 6.5 percent coupon bond with 14 years left to
maturity is priced to offer a 7.2 percent yield to maturity. You believe that in one year, the yield
to maturity will be 6.8 percent. What is the change in price the bond will experience in dollars?

Compute the current bond price:

 1 
1 − (1 + 0.036)28  $1,000
Bond Price = $32.50   + = $567.42 + $371.47 = $938.89
  (1 + 0.036)
28
0.036
 
 

or TVM calculator: N = 28, I = 3.6, PMT = 32.50, FV = 1000; CPT PV = -938.89

Now compute the price in one year:

 1 
1 − (1 + 0.034)26  $1,000
Bond Price = $32.50   + = $555.14 + $419.24 = $974.38
  (1 + 0.034)
26
0.034
 
 

or TVM calculator: N = 26, I = 3.4, PMT = 32.50, FV = 1000; CPT PV = -974.38

So, the dollar change in price is:

$974.38 − $938.89 = $35.49

LG6 7-27 Yield to Maturity A 5.65 percent coupon bond with 18 years left to maturity is offered for
sale at $1,035.25. What yield to maturity is the bond offering? (Assume interest payments are
semiannual.)

TVM calculator: N = 36, PV = -1,035.25, PMT = 28.25, FV = 1000; CPT I = 2.671% YTM =
2.671% × 2 = 5.34%

7-9
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 Chapter 07 – Valuing Bonds

LG6 7-28 Yield to Maturity A 4.30 percent coupon bond with 14 years left to maturity is offered for
sale at $943.22. What yield to maturity is the bond offering? (Assume interest payments are
semiannual.)

TVM calculator: N = 28, PV = -943.22, PMT = 21.5, FV = 1000; CPT I = 2.432% YTM =
2.432% × 2 = 4.86%

LG6 7-29 Yield to Call A 6.75 percent coupon bond with 26 years left to maturity can be called in six
years. The call premium is one year of coupon payments. It is offered for sale at $1,135.25.
What is the yield to call of the bond? (Assume interest payments are semiannual.)

TVM calculator: N = 12, PV = -1,135.25, PMT = 33.75, FV = 1067.50; CPT I = 2.541%

YTC = 2.541% × 2 = 5.08%

LG6 7-30 Yield to Call A 5.25 percent coupon bond with 14 years left to maturity can be called in
four years. The call premium is one year of coupon payments. It is offered for sale at $1,075.50.
What is the yield to call of the bond? (Assume interest payments are semiannual.)

TVM calculator: N = 8, PV = -1,075.50, PMT = 26.25, FV = 1,052.50; CPT I = 2.193% YTC =

2.193% × 2 = 4.39%

LG6 7-31 Comparing Bond Yields A client in the 39 percent marginal tax bracket is comparing a
municipal bond that offers a 4.5 percent yield to maturity and a similar-risk corporate bond that
offers a 6.45 percent yield. Which bond will give the client more profit after taxes?

First determine the ETY:

Muni yield 4.5%

Equivalent taxable yield = = = 7.38%
1-Tax rate 1 − 0.39

Since 7.38 percent is greater than 6.45 percent, the client should take the municipal bond.

LG6 7-32 Comparing Bond Yields A client in the 28 percent marginal tax bracket is comparing a
municipal bond that offers a 4.5 percent yield to maturity and a similar-risk corporate bond that
offers a 6.45 percent yield. Which bond will give the client more profit after taxes?

First determine the ETY:

Muni yield 4.5%

Equivalent taxable yield = = = 6.25%
1-Tax rate 1 − 0.28

Since 6.25 percent is less than 6.45 percent, the client should take the corporate bond.

advanced problems

7-10
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 Chapter 07 – Valuing Bonds

LG2 7-33 TIPS Total Return Reconsider the 3.5 percent TIPS discussed in problem 7-19. It was
issued with CPI reference of 185.6. The bond is purchased at the beginning of the year (after the
interest payment), when the CPI was 193.5. For the interest payment in the middle of the year,
the CPI was 195.1. Now, at the end of the year, the CPI is 199.6 and the interest payment has
been made. What is the total return of the TIPS in dollars and in percentage terms for the year?

Capital gain = End of year value – Beginning of year value =

199.6 / 185.6 × $1,000 – 193.5 / 185.6 × $1,000 = $1,075.43 − $1,042.56 = $32.87
The mid-year interest payment was: 0.5 × 0.035 × 195.1 / 185.6 × $1,000 = $18.40
The end-of-year interest payment was: 0.5 × 0.035 × 199.6 / 185.6 × $1,000 = $18.82
Total dollar return = $32.87 + $18.40 + $18.82 = $70.09
As a percentage, the return was = $70.09 / $1,042.56 = 6.72%

LG2 7-34 TIPS Total Return Reconsider the 2.25 percent TIPS discussed in problem 7-20. It was
issued with CPI reference of 187.2. The bond is purchased at the beginning of the year (after the
interest payment), when the CPI was 197.1. For the interest payment in the middle of the year,
the CPI was 200.1. Now, at the end of the year, the CPI is 203.8 and the interest payment has
been made. What is the total return of the TIPS in dollars and in percentage terms for the year?

Gain = End of year value – Beginning of year value =

203.8 / 187.2 × $1,000 − 197.1 / 187.2 × $1,000 = $1,088.68 − $1,052.88 = $35.80
The mid-year interest payment was: 0.5 × 0.0225× 200.1 / 187.2 × $1,000 = $12.03
The end-of-year interest payment was: 0.5 × 0.0225× 203.8 / 187.2 × $1,000 = $12.25
Total dollar return = $35.80 + $12.03 + $12.25 = $60.08
As a percentage, the return was = $60.08 / $1,052.88 = 5.71%

LG5 7-35 Bond Prices and Interest Rate Changes A 6.25 percent coupon bond with 22 years left to
maturity is priced to offer a 5.5 percent yield to maturity. You believe that in one year, the yield
to maturity will be 6.0 percent. If this occurs, what would be the total return of the bond in
dollars and percent? (Assume interest payments are semiannual.)

Compute the current bond price:

 1 
1 − (1 + 0.0275)44  $1,000
Bond Price = $31.25   + = $791.92 + $303.11 = $1,095.03
  (1 + 0.0275)
44
0.0275
 
 

or TVM calculator: N = 44, I = 2.75, PMT = 31.25, FV = 1,000; CPT PV = -1,095.03

Now compute the price in one year:

 1 
1 − (1 + 0.03)42  $1,000
Bond Price = $31.25   + = $740.67 + $288.96 = $1,029.63
  (1 + 0.03)
42
0.03
 
 

7-11
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Education.
 Chapter 07 – Valuing Bonds

or TVM calculator: N = 42, I = 3.0, PMT = 31.25, FV = 1,000; CPT PV = -1,029.63

Total return = Dollar change in price + Interest payments:

$1,029.63 − $1,095.03 + $62.50 = -$2.90
The percentage return is: -$2.90 / $1,095.03 = -0.26%

LG5 7-36 Bond Prices and Interest Rate Changes A 7.5 percent coupon bond with 13 years left to
maturity is priced to offer a 6.25 percent yield to maturity. You believe that in one year, the yield
to maturity will be 7.0 percent. If this occurs, what would be the total return of the bond in
dollars and percentage terms? (Assume interest payments are semiannual.)

Compute the current bond price:

 1 
1 − (1 + 0.03125)26  $1,000
Bond Price = $37.50   + = $660.84 + $449.30 = $1,110.14
  (1 + 0.03125)
26
0.03125
 
 

or TVM calculator: N = 26, I = 3.125, PMT = 37.50, FV = 1000; CPT PV = -1,110.14

Now compute the price in one year:

 1 
1 − (1 + 0.035)24  $1,000
Bond Price = $37.50   + = $602.19 + $437.96 = $1,040.15
  (1 + 0.035)
24
0.035
 
 

or TVM calculator: N = 24, I = 3.5, PMT = 37.50, FV = 1000; CPT PV = -1,040.15

Total return = Dollar change in price + Interest payments:

$1,040.15 − $1,110.14 + $75.00 = $5.01

The percentage return is: $5.01 / $1,110.14 = 0.45%

LG6 7-37 Yields of a Bond A 2.50 percent coupon municipal bond has 12 years left to maturity and
has a price quote of 98.45. The bond can be called in four years. The call premium is one year of
coupon payments. Compute and discuss the bond’s current yield, yield to maturity, taxable
equivalent yield (for an investor in the 35 percent marginal tax bracket), and yield to call.
(Assume interest payments are semiannual and a par value of $5,000.)

Current yield = (0.025 × $5,000) / (0.9845 × $5,000) = 2.50% / 98.45% = 2.54%

TVM calculator: N = 24, PV = -4,922.50, PMT = 62.50, FV = 5000; CPT I = 1.3258%

YTM = 1.3258% × 2 = 2.65%

7-12
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Education.
 Chapter 07 – Valuing Bonds

Muni yield 2.65%

Equivalent taxable yield = = = 4.08%
1-Tax rate 1 − 0.35

TVM calculator: N = 8, PV = -4,922.50, PMT = 62.50, FV = 5125; CPT I = 1.753%

YTC = 1.753% × 2 = 3.51%
The current yield is higher than the coupon rate because this is currently a discount bond. This is
also shown by the YTM, which is greater than the coupon rate. The YTC is comparatively high,
but it is currently unlikely that the bond will be called early since interest rates have risen.

LG6 7-38 Yields of a Bond A 3.85 percent coupon municipal bond has 18 years left to maturity and
has a price quote of 103.20. The bond can be called in eight years. The call premium is one year
of coupon payments. Compute and discuss the bond’s current yield, yield to maturity, taxable
equivalent yield (for an investor in the 35 percent marginal tax bracket), and yield to call.
(Assume interest payments are semiannual and a par value of $5,000.)

Current yield = (0.0385 × $5,000) / (1.0320 × $5,000) = 3.85% / 103.20% = 3.73%

TVM calculator: N = 36, PV = -5,160, PMT = 96.25, FV = 5000; CPT I = 1.803%
YTM = 1.803% × 2 = 3.61%

Muni yield 3.61%

Equivalent taxable yield = = = 5.55%
1-Tax rate 1 − 0.35

TVM calculator: N = 16, PV = -5,160, PMT = 96.25, FV = 5192.50; CPT I = 1.90%

YTC = 1.90% × 2 = 3.80%

The current yield is lower than the coupon rate because this is currently a premium bond. This is
also shown by the YTM , which is lower than the coupon rate. The YTC is comparatively high,
but it is currently unlikely that the bond will be called early since interest rates are only a little
lower than the coupon rate and the call premium would have to be paid.

LG7 7-39 Bond Ratings and Prices A corporate bond with a 6.5 percent coupon has 15 years left to
maturity. It has had a credit rating of BBB and a yield to maturity of 7.2 percent. The firm has
recently gotten into some trouble and the rating agency is downgrading the bonds to BB. The
new appropriate discount rate will be 8.5 percent. What will be the change in the bond’s price in
dollars and percentage terms? (Assume interest payments are semiannual.)

Compute the current bond price:

 1 
1 − (1 + 0.036)30  $1,000
Bond price = $32.50   + = $590.3223 + $346.1046 = $936.43
  (1 + 0.036)
30
0.036
 
 
or TVM calculator: N = 30, I = 3.6, PMT = 32.50, FV = 1000; CPT PV = -936.43

Now compute the price after the rating change:

7-13
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Education.
 Chapter 07 – Valuing Bonds

 1 
1 − (1 + 0.0425)30  $1,000
Bond price = $32.50   + = $545.32 + $286.89 = $832.21
  (1 + 0.0425)
30
0.0425
 
 

or TVM calculator: N = 30, I = 4.25, PMT = 32.50, FV = 1000; CPT PV = -832.21

So, the dollar change in price is:

$832.21 − $936.43 = -$104.22
The percentage return is: -$104.22 / $936.43 = -11.13%

LG7 7-40 Bond Ratings and Prices A corporate bond with a 6.75 percent coupon has 10 years left
to maturity. It has had a credit rating of BB and a yield to maturity of 8.2 percent. The firm has
recently become more financially stable and the rating agency is upgrading the bonds to BBB.
The new appropriate discount rate will be 7.1 percent. What will be the change in the bond’s
price in dollars and percentage terms? (Assume interest payments are semiannual.)

Compute the current bond price:

 1 
1 − (1 + 0.041)20  $1,000
Bond price = $33.75   + = $454.64 + $447.70 = $902.34
  (1 + 0.041)
20
0.041
 
 

or TVM calculator: N = 20, I = 4.1, PMT = 33.75, FV = 1000; CPT PV = -902.34

Now compute the price after the rating change:

 1 
1 − (1 + 0.0355)20  $1,000
Bond price = $33.75   + = $477.51 + $497.73 = $975.24
  (1 + 0.0355)
20
0.0355
 
 
or TVM calculator: N = 20, I = 3.55 PMT = 33.75, FV = 1000; CPT PV = -975.24

So, the dollar change in price is:

$975.24 − $902.34 = $72.90
The percentage return is: $72.90 / $902.34 = 8.08%

7-41 Spreadsheet Problem Say that in June of 2014, a company issued bonds that are
scheduled to mature in June of 2017. The coupon rate is 5.75 percent and is paid semiannually.
The bond issue was rated AAA.
a. Build a spreadsheet that shows how much money the firm pays for each interest rate payment
and when those payments will occur if the bond issue sells 50,000 bonds.
b. If the bond issue rating would have been BBB, then the coupon rate would have been 6.30
percent. Show the interest payments with this rating. Explain why bond ratings are important to
firms issuing capital debt.

7-14
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Education.
Chapter 07 – Valuing Bonds

c. Consider that interest rates in the economy increased in the first half of 2012. If the firm
would have issued the bonds in January of 2012, then the coupon rate would have only been 5.40
percent. How much extra money per year is the firm paying because it issued the bonds in June
instead of January?

The spreadsheet might look like:

a. b. c.
Coupon Rate= 5.75% 6.30% 5.40%
Par Value = $1,000 $1,000 $1,000
Number of Bonds = 50,000 50,000 50,000

Interest payments Interest payments Interest payments

Jun-12 $ 0 $ 0 $1,350,000
Dec-12 1,350,000
Jun-13 1,350,000
Dec-13 1,350,000
Jun-14 1,350,000
Dec-14 1,437,500 1,575,000 1,350,000
Jun-15 1,437,500 1,575,000 1,350,000
Dec-15 1,437,500 1,575,000 1,350,000
Jun-16 1,437,500 1,575,000 1,350,000
Dec 16 1,437,500 1,575,000 1,350,000
June 17 1,437,500 1,575,000 1,350,000
1

B. The better the bond rating, the lower the interest rate a firm will have to pay. In this example,
the firm saves $275,000 each year in interest payments with the higher bond rating.

C. The firm is paying $175,000 per year more in interest because it issued its bonds after the
rates increased.

research it!
Bond Information Online

Information on the bond market is widely available in papers like The Wall Street Journal and
Barron’s. Bond information can also be found online at financial websites like
finance.yahoo.com and http://www.finra.org. The bond credit rating agencies also
maintainwebsites with their own bond market news.
You can follow the bond market easily at places like Yahoo! Finance . Click on the Bond
link in the menu to go to their Bond Center. Bond yields for various maturity Treasury securities
are shown for today and for previous days. The Bond Composite Rates link shows similar
comparisons for municipal and corporate bonds too.
Bond calculators are also available for free on the Web. Compare a bond price result from
your calculator or the price equation with the online bond calculator result at Investopedia.
(www.investopedia.com/calculator/BondPrice.aspx)

7-15
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Education.
Chapter 07 – Valuing Bonds

SOLUTION: All answers will be different. Here is an example answer:

An example done on the website…

 1 
1 − (1 + 0.02)6  $1,000
Bond price = $17.50   + = $98.03 + $887.97 = $986.00
  (1 + 0.02)
6
0.02
 
 

or TVM calculator: N = 6, I = 2, PMT = 17.50, FV = 1000; CPT PV = -986.00

All computations are the same.

integrated mini-case: Corporate Bond Credit Risk Changes and Bond Prices

Land’o’Toys is a profitable, medium-sized, retail company. Several years ago, it issued a 6.5
percent coupon bond, which pays interest semiannually. The bond will mature in 10 years and is
currently priced in the market as $1,037.19. The average yields to maturity for 10-year corporate
bonds are reported in the following table by bond rating.

Bond Rating Yield (%) Bond Rating Yield (%)

AAA 5.4 BB 7.3
AA 5.7 B 8.2
A 6.0 CCC 9.2
BBB 6.5 CC 10.5
C 12.0
D 14.5

Periodically, one company will purchase another by buying all of the target firm’s stock. The
bonds of the target firm continue to exist. The debt obligation is assumed by the new firm. The
credit risk of the bonds often changes because of this type of an event.
7-16
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 Chapter 07 – Valuing Bonds

Suppose that the firm Treasure Toys makes an announcement that they are purchasing
Land’o’Toys. Due to Treasure Toy’s projected financial structure after the purchase, Standard &
Poor’s states that the bond rating for Land’o’Toys bonds will change to BB.

a. Compute the yield to maturity of Land’o’Toys bonds before the purchase announcement
and use it to determine the likely bond rating.
b. Assume the bond’s price changes to reflect the new credit rating. What is the new price?
Did the price increase or decrease?
c. What is the dollar change and percentage change in the bond price?
d. How do the bond investors feel about the announcement?

SOLUTION:
a. TVM calculator: N = 20, PV = -1,037.19, PMT = 32.50, FV = 1000 CPT I = 3.00%
YTM = 3.00% × 2 = 6.00%
This bond is likely rated as an “A.”
b. The new YTM will likely be 7.3 percent annually, so the price will change to:
TVM calculator: N = 20, I = 3.65, PMT = 32.50, FV = 1000; CPT PV = -943.91
The price decreased because the bond got riskier.
c. The price change would be $943.91 − $1,037.19 = -$93.28
The change as a percentage would be -$93.28 / $1,037.19 = -8.99%
d. In a firm buyout, the stockholders of the target firm generally earn a nice profit. However, the
bond holders of the target firm can be unhappy if the new combined firm has a worse bond
rating, like in this case.

7-17
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found this warmer than the wearing of woollens next the skin; but this I
am inclined to regard as a mistake. When furs are worn during the
march, their congelation and consequent increase of weight are
diminished by wearing the furs sometimes inside and sometimes
outside. The inhabitants of Lapland and Kamschatka constantly wear the
fur outside; and some Eskimo tribes wear double furs—one turned
inside, the other outside. If cloth clothes are worn, their surface should
be smooth, so as not to harbour the driving snow; and all buttons
should be of a large size, as frozen fingers find it easier to manage
them.
15. The covering for the feet of a sledge-party should be sailcloth
boots, lined with flannel, and soled with stout felt; and it is not advisable
to strengthen the soles by plaiting them with string, as the boot thereby
loses that perfect pliability which is indispensable to preserve the foot
from the danger of frost-bite. Hence also any covering of india-rubber is
objectionable. Leather boots must not be used in sledging; because they
become utterly unpliable at a low temperature, and make frost-bites
inevitable; and when once put on they cannot be pulled off without
being cut to pieces. All boots should be so large and their legs so wide,
that they may be put on conveniently over the trousers; and sailcloth
boots especially, because of their shrinking from frost, should be so
wide, that they can be put on easily over three pairs of strong woollen
stockings. The Eskimo, the inhabitants of Lapland, Kamschatka, and
other northern nomad tribes, wear the dried grass of Cyperacites as
their foot-coverings; and this might be recommended, if it did not also
involve the use of skin-coverings for the feet, in which no European can
make long marches, without their being inflamed. Because, in the Arctic
regions, the condensation of moisture in the shape of ice is an enemy
constantly to be guarded against, all stuffs are to be avoided which tend
to harbour moisture, especially the linings of coats, pockets, and so
forth, made of cotton instead of pure wool. India-rubber garments must
never be used, as they prevent evaporation from the body.
16. If dogs are used to draw the large sledges along with men, they
ought to be harnessed in the way which the sketch on a preceding page
represents. The dog-sledge should be laid across the hinder part of the
principal sledge, and made fast to it. If, however, dogs alone are
employed, and at walking-pace, they are harnessed in pairs, one pair
behind the other. Each dog should draw by a single trace, as we can
only thus avoid the constant entangling of the rope-traces. If more than
four dogs be employed, they cannot well go in pairs one before the
other, but must be harnessed to the sledge in a row, side by side, and
the traces must be long, so as to enable the most powerful and best-
trained dogs, which are placed in the middle, to be somewhat in
advance of the others. The dogs should be selected according to the
special purpose for which they are to be employed; for, while an Eskimo
dog will run, but shirks the effort of drawing heavy loads, a
Newfoundland submits to its load, but, goes at a foot’s-pace. In the
Hudson’s Bay territory a cross between a wolf and a dog is regarded as
the best animal for draught, because it surpasses the dog proper in
strength and courage. Newfoundlands of pure breed are, on the whole,
most to be recommended, and next to them, the Eskimo dog, which has
a good deal of the character of the wolf, though he is difficult to hold.
These dogs, too, although they are indescribably, thievish, voracious,
and ill-tempered, in consequence of their harsh treatment and bad
feeding, have this further distinguishing quality, that they will stick to a
retreating bear with wonderful pertinacity till the hunter comes up to kill
it. European dogs are only to be taken when an expedition has not the
opportunity of procuring dogs of the kinds we have mentioned; but, if
they be employed, they should be strong and hardy, with long hair and
thick coat. The purity of their breed is of less consequence than their
being good-tempered, as fights between large dogs end in the
destruction of the weaker. The Ostjaks, in the neighbourhood of
Obdorsk, are the nomad tribes nearest Europe who use dogs for
sledges; and their breed of dogs is far superior to any other, either in
Lapland or Northern Russia. The dogs of Russia in Europe were
employed in the expedition (1839) of Ziwolka and Mojsejew to Novaya
Zemlya; but it does not appear that they answered the expectations
which had been formed. In sledge-expeditions the dogs are allowed to
sleep in the open air; but they must be fastened to stakes, lest the
scenting some animal should tempt them to run off. We ourselves,
however, allowed a small tent, weighing little, for the few dogs which
accompanied us. Dogs whose paws have not been early hardened by
long marches on the ice, easily hurt their feet, which do not heal during
the journey; and wounds can only be prevented from getting worse by a
daily application of collodion and brandy, and by a protection of flannel;
and this is the treatment we pursued to Jubinal in the journey we are
about to describe. Whenever a dog is exhausted by dragging, it is
generally blooded in the tail or ear after the fashion followed by the
Siberian tribes.

TOROSSY IN HARNESS.

CHAPTER IV.
THE FIRST SLEDGE JOURNEY

1. From the preceding remarks on the equipment of a sledge, the

reader will, perhaps, have gained a pretty clear notion of the procedure
by which we are enabled to travel for weeks in Arctic wastes. This
description will have shown him the various and manifold contingencies
against which a leader has to provide, if he is to conduct an expedition
safely and successfully, especially if he commands a body of men, who
are neither so careful nor so observant as those who accompanied me in
the sledge journeys I am about to describe.
 2. I now pass to the first of these, the object of which was to
determine the position and general relations of the new Land, which still
remained a mystery to us, to reconnoitre a route for its exploration
towards the north, and to ascertain what we could of the character of
the intervening regions. I regarded the ascent of the high mountain—
Cape Tegetthoff—which we had seen before us for months, as the
preliminary step towards the attainment of these ends. Its great
distance from the ship had rendered abortive all the attempts to reach it
which had been made at the end of last autumn. With the beginning of
March (1874) the sledging was now to commence in reality. Though the
sun had returned on the 24th of February, it was seldom visible in the
remaining days of that month; a heavy water-sky overspread the
southern heavens, and the only cheerful precursors of spring were the
birds which once more appeared in our neighbourhood. The snow had
been distressingly soft, but the north-east winds which prevailed during
the first days of March hardened it. When these winds fell, the
temperature also fell, and although the beginning of March is regarded
as a time little favourable for sledge travelling on account of the
excessive cold, our impatience for action overcame all doubts and fears,
and on the 9th one of our larger sledges stood ready, laden and packed
for an expedition, equipped for a week. It carried an extra quantity of
provisions, which were intended to form depôts. From the general store
we took 39 lbs. of hard bread, 5 lbs. of pemmican, 16 lbs. of boiled
beef, 6½ lbs. of lard, 1 lb. of pea-sausage, ½ lb. of salt and pepper, 6
lbs. of rice, 2 lbs. of grits, 5 lbs. of chocolate, 5 gallons of rum, 1 lb. of
extract of meat, 2 lbs. of condensed milk, and 8 gallons of alcohol. The
rest of the baggage consisted of such articles as we have described
above. We had besides 3 breech-loaders and 100 cartridges, of which 40
were fired away.
3. I selected for my party six men and three dogs, Gillis, Torossy and
Sumbu. As I reserved the picked men of our crew for the contemplated
longer journey towards the north, some of the above were not
altogether adequate to the work. My two Tyrolese, however, Haller and
Klotz, possessed great endurance, Lukinovich and Cattarinch in a lesser
degree; as for Pospischill and Lettis, they would have done credit to
Falstaff’s corps. As Pospischill suffered from lung disease, Lukinovich
from palpitation of the heart, Haller from chronic rheumatism, and Lettis
from a tendency to bronchial catarrh, it may be inferred how necessity
alone enabled them to do what they did, when the temperature fell
lower than we expected.
4. On the morning of the 10th of March we left the ship, and the “Flag
of the sledge journeys,” which had hung for so long a time over my
berth, now fluttered in the fresh breeze which blew from the north-west.
So much had this “at last,” excited me, that I could not sleep a wink,
and those who were starting on the expedition as well as those who
remained behind were as much agitated, as if the conquest of Peru or
Ophir were contemplated, and not the exploration of lands buried under
snow and ice. With indescribable joy we began the mechanical drudgery
of dragging the sledge, each of us at first wearing a mask, like the
members of the “Vehmgericht,” until we became habituated to the
withering effects of the wind. As we moved along the level surface of
the land ice of the preceding autumn, after forcing our way through the
hummocky ice, which had formed itself on the north of the ship, we saw
behind us some black spots approaching at full speed. These were the
dogs we had left behind, which insisted on travelling with us, and much
craft and force, supplemented by the logic of a few shots, were needed
to force them to return to the ship. My companions interpreted the
conduct of the dogs refusing to remain with the ship as a sign
foreboding the death of our engineer. As the lading of our sledge
amounted to about 6 or 7 cwts. and the snow was favourable for
sledging, we were able to advance at the unusual rate of 100 paces in a
minute, and in two hours we passed the south-west Cape of Wilczek
Island. Close to this Cape we saw an iceberg which had fallen on the ice
and crushed it all round, and sheltering ourselves from the wind under
the lee of another, we took our mid-day rest, with the thermometer at
-15° F. As the sun at noon was so little above the horizon that we got
uncertain results for the determination of the latitude, I preferred during
this journey to begin the surveying and, at the same time, the
determination of the localities of Franz-Josef Land, by a triangulation of
elevated points, to which the measurement of a base was afterwards to
be added. Hence the ascent of high mountains formed part of our
programme.
5. We continued our march till the ship disappeared from our eyes,
and the route now lost its level character and assumed the appearance
of a very chaos of ice. In the evening we reached a high rocky
promontory of Wilczek Island, near which rose some stranded icebergs,
and against which the ice-sheet of the sea, impelled by the waves, was
dashed and broken. Close in shore the ice was in violent motion, and as
we passed over the “ice-foot,” to the amazement of all, three of our men
fell into a fissure. All through the night we heard in our tent, which we
erected on the land, the cracking and crashing sounds emitted by the
ice. Next day—March 11th—making a very early start, the thermometer
at -14° F., we saw a water-sky to the south, and, after ascending a
height, close before us lay the sea, covered with young ice. Heavy mists
were ascending from fissures, and the level surface of the young ice
glowed with the colours of the morning. Immediately under the coast of
the island lay a narrow band of piled-up ice, with traces of recent
pressures, and thinking that the interior was impassable to a laden
sledge, we began our toilsome march along its rocky coasts.
6. We were in no mood to observe the picturesque character of our
route, for our labours in dragging the sledge over the hummocky ice
were excessive. We had frequently to unload the sledge or dig away an
obstacle which could not be evaded. The conduct of the dogs was not
quite faultless; and as for my companions, if one of them turned round,
or if a bird flew past, this was enough to make the rest pause in their
pulling, with the ready excuse of surprise at the circumstance. If in such
cases Klotz failed to exert his strength, the sledge at once came to a
standstill. We pressed on through icebergs on each side of us, shattered
by the frost, and amid a constant noise of cracking and splitting
produced by the increasing cold. At length, after several hours, we came
out on an open level and crossed the gentle slope of a snow-covered
spit of land. The rugged mountainous front of Hall Island, and the long
glacier walls of M’Clintock Island, now rose before us. Our course lay
clearly marked out: it ran in a north-westerly direction over a snow-
covered level of old ice towards Cape Tegetthoff. Soon, however, the
mist began to rise, and floated over the wide expanse of ice, and so
obscured every object that we were able to continue our journey in the
twilight only by means of the compass. We determined our course by
the aid of small hummocks of ice, which rose above the general level
surface, but so great was the difficulty of keeping a definite line in the
mist, that we were compelled to halt every four hundred paces, and
correct our route by the larger compass, which often showed that we
had deviated 20° to 40° in azimuth from the true line, and in some
cases the error amounted to even 90°. To add to all this, snow began to
fall, so that we were almost blinded, and hence it was that a bear for
some time followed our footsteps, unseen by any of the party. When we
first sighted him, though he was at a little distance off, he looked
enormously large in the mist. We quickly seized our rifles, and one of
our men firing precipitately, the bear disappeared, leaving no track of
blood to show whether it had been wounded. But bears, even when
severely wounded, often leave no such trace; hence doubtless the origin
of the assertion, that a wounded bear can dress its own wound, using
its paw to apply snow to the injured part.
7. It was our practice in this, as well as in the following expeditions, to
rest at noon for an hour or two, and putting up the tent take a meal of
hot boiled beef. But the inferiority of an untrained to a well-trained
sledge party was seen even in such operations. Much time was wasted;
in like manner and from the same cause, the coffee-making in the
morning, the preparation for the march, the taking down of the tent, the
loading of the sledge, occupied my party for hours, and the smallest
snow-drifting sufficed to blow away all their moral force. As we left the
tent, the bear stood again before us, but disappeared as suddenly when
we seized our rifles. In the course of a few hours we passed some
icebergs shaped like huge tables, and when the wind rose and lifted up
the mist for a few moments, we saw the rocky heights of Cape
Tegetthoff towering above us at no great distance. The snow began to
drive directly in our faces, and meanwhile the bear had followed our
steps, often hidden from our sight by the vehement gusts of snow,
sometimes on our flank, sometimes in our rear, keeping at about 200
paces distance from us. By feigning unconcern we hoped to stimulate
his courage to attack us, reckoning on converting him into food.
Suddenly, however, he ran towards us, and our apparent indifference
disappeared. In a moment we stood ready to receive him; the sledge
was drawn across the line of his advance, and each casting off his drag-
rope, knelt and aimed over the sledge. The directions were to aim at the
lower part of the skull, and to fire only when he was quite close to us.
The dogs were moved to the further side of the sledge, and covered
with its sail. Of the other four men, two held the dogs, a third laid hold
of a revolver, and the fourth provided himself with some cartridges
ready for contingencies. After the completion of these preparations, no
one either moved or spoke. The bear meanwhile, moved steadily
towards us, stopping for a moment at the spot where a piece of bread
had intentionally been placed. Just as he stopped to examine it, three
shots in rapid succession went off, and the bear, hit in the head and
chest, lay dead on the ground. The dogs, being let loose, rushed on
their fallen foe and began to tear his shaggy skin. While we were cutting
the bear up, they sat down and watched us, occasionally dipping their
tongues in the warm red blood and snapping up the morsels which were
thrown to them. The bear we had shot was a female, six feet in length;
and after cutting off the tongue and the best portions for meat, we
continued our march in the teeth of the driving snow. One of our people
had cut his finger badly in dressing the bear, and as the application of
chloride of iron did not suffice to stop the violent bleeding, we were
compelled to halt and erect our tent about six o’clock in the evening.
8. When we set out again on the morning of the 12th (the
thermometer marking -26° F.) all round us was a red undulating waste,
and the driving gusts of snow, which hid from our view the nearest
rocky heights, pricked us as if with countless sharp-pointed darts. Such
drifting snow, although it greatly impedes travelling, cannot be
compared with the tremendous snow-storms I had experienced in
Greenland. The same precursory signs were, however, common to both
—extraordinary refractions, brilliant auroras, perfect calms, and a dull
close atmosphere. In taking down the tent, which was covered with
wreaths of snow, every article which fell in it was at once buried under
its drifting waves. Of all the tests of endurance in Arctic journeys none
exceeds that of continuing the march amid driving snow at a low
temperature. Some of my company who had not been accustomed to
walk in such tremendous weather, in attempting to button on their wind-
screens and nose-bands and fasten up their coats after we had left the
tent, at once had their fingers frozen. Our sail-cloth boots were as hard
as stone, and every one took to stamping to preserve his feet from
frost-bite. Under such circumstances the sledge is not packed with that
precision which is the only preservative against the loss of the various
articles of its contents. To watch against this contingency is the special
business of the man who pushes the sledge from behind. Hurry and
confusion were visible in the bag of provisions being left open. At last
everything was ready: the march began, men and dogs, dragging the
sledge along, all coated with snow and entirely covered except the eyes.
In a momentary lull of the wind, we discovered that our march the day
before had led us far too much to the south, and Cape Tegetthoff now
lay before us directly north. Thither we now directed our steps, and as
the wind still came from the north-west, we struck our sledge sail. As a
consequence of this marching against the wind, which is most severely
felt by the leaders of the team, all, even Klotz, had their noses frost-
bitten. We had much difficulty in persuading him to rub his with snow,
urging that his nose did not belong to himself alone, but that seven
noses and fourteen feet were under the general supervision of the
leader, and that each had a share in this general property.
9. As we came under the land, the violence of the snow-drifting
somewhat abated, and in about two hours a calm set in. Close before us
lay the plateau of Cape Tegetthoff, with its steep precipitous sides. From
its summit a line of basalt rocks descended towards the east, ending in
two columns, each about two hundred feet high. We reached them just
before noon, and the weather being propitious we determined the
latitude by observation and found it to be 80° 6′ N.L. The force of the
tide not being able to raise or burst the bay-ice, the thaw-water of the
spring collects itself on the coast-edge in small lakes. Close under one of
these towers of dark-coloured basalt, we set up our tent; and while our
cook was preparing our dinner of bear’s flesh we lay in the sun under
the rocks in order to dry our clothes, which were coated all over with
ice.
 CAPE TEGETTHOFF.
10. About one o’clock I set off with the Tyrolese to the plateau of
Cape Tegetthoff. Those who remained behind spent their time in rubbing
their feet with snow. Lettis had reserved for us the unpleasant surprise
that his feet had been frost-bitten for three hours, and that he had lost
all feeling in them. We marched for an hour on the snow, which lay in
tender azure-blue shadow under the long line of basalt rocks, and after
climbing for another hour over rosy-coloured masses of snow lying
between crystallized rocks, we reached the highest point of the
undulating plateau. No ascent could be more interesting, made, as it
was, in a country so utterly unknown. Haller and Klotz were born
mountaineers, and during my surveys in Tyrol I had made a hundred
ascents of mountains of 10,000 feet, without the tension of expectation
I now experienced, as I mounted this summit. The ascent was not
without difficulty, and it taxed the extraordinary dexterity of the two
Tyrolese to climb up steep icy precipices in their sail-cloth boots. It was
about three o’clock in the afternoon when we reached the summit; the
temperature had fallen to -30° F. (in the tent the thermometer at the
same time marked -24° F. and in the ship -20° F.). By a barometrical
measurement we found the height to be 2,600 feet. Contrary to
expectation the view from the top proved to be limited. In a northerly
direction, the atmosphere, laden with innumerable ice crystals,
possessed so little transparency that Cape Berghaus, at no distance off,
appeared to be covered with a thick veil, and all distant objects were
enveloped in a dense mist. Fogs lay over the interior to the west, and
banks of reddish vapour covered the icy ocean to the south. Some
narrow strips of open water sparkled in the sun. After making a sketch
of all that could be distinctly seen, and determining the bearings of
some points, we returned to the tent. Here we found Lettis and
Cattarinch engaged in rubbing with snow the hands of Lukinovich, which
had been frost-bitten, while he was occupied in rubbing the feet of
Lettis.
11. Nothing except the wind makes men so sensitive to cold as the
want of exercise. The fall of the temperature had been felt far more by
those who remained behind, than by ourselves. Even the wonderful
beauty of the snow-clad summit bathed in rosy light failed to modify
their severe judgment of Franz-Josef Land. Instead of greeting us with
supper ready at the appointed hour, which he ought to have prepared
without the use of spirit, the bewildered cook was vainly endeavouring
to roast bear’s flesh over smoky chips and sticks, and we got our supper
only after I had served out a bottle of alcohol. We then went to rest in
the common sleeping bag, but soon began to shake with cold, which
threw Pospischill, who took oil twice a day for lung-disease, into a fever.
When I left the tent to look at the thermometers, the mercury in one
had gone down into the bulb and was frozen, and the spirits of wine in
the other showed 41° below zero (C.). Some hot grog, for which a
whole bottle of strong rum was used, put us all right, raising the
temperature of our bodies by one or two degrees. After this refreshment
we all fell into a deep sleep, which was incommoded only by the
increasing dampness of our clothes.
12. We started again about six o’clock on the morning of March 13.
The sun had not risen, the spirit of wine thermometer indicated nearly
44° (C.) below zero, and a piercingly cold breeze met us from the land.
Even on board the ship the temperature at the same time marked 37°
(C.) below zero, a difference to be ascribed to the influence of the land
in lowering the temperature. In Greenland we observed still greater
deviations of this nature, which seem to show that climatical influences
are subject to great variations, even in places which are in close
proximity. Cape Berghaus was our goal. From its summit a general view
of the distribution of the land under 80° N. lat. was reasonably to be
expected. Long before the rise of the sun, the hard snowy plains were
tinted with a pale green reflected light, and the icebergs wore a dull
silvery hue, while their outlines constantly changed and undulated. Our
road was formed from millions of glittering snow crystals, so hard that
the sledge glided over them with difficulty and with a creaking noise,
and after three hours, the exertion of dragging had so exhausted us that
we determined to unload the sledge, and, after melting some snow, to
wet its runners with water. A layer of ice was immediately formed on
them, which greatly facilitated the labour of dragging, till it was rubbed
off. A broad inlet surrounded by picturesque mountains—Nordenskjöld
Fiord—had opened out on our left, and as a large glacier formed the
background of this fiord, we took a westerly direction in order to study
the ice-formation. The heights surrounding this fiord seemed equally as
well fitted as Cape Berghaus for the object we had in view. The further
we penetrated into it, the deeper became the layer of fine powdery
snow which the wind had deposited in this hollow. At noon we reached
the high precipitous termination of Sonklar-Glacier, and pitched our tent
by an iceberg.

MELTING SNOW DURING A HALT NEAR CAPE BERGHAUS.

13. In the afternoon, accompanied by the Tyrolese, I ascended a

mountain—Cape Littrow—whose height, by means of an aneroid
barometer, we ascertained to be 2,500 feet. From its summit we had a
view of the mountains of Hall Island, and of the islands which lay to the
east. Not a breath of wind was stirring, and the atmosphere was clearer
than usual, so that, without suffering in the least degree from cold, I
could work for three hours, first in sketching our surroundings and then
in taking observations. From south-west to north-east the peaks of
distant mountains rose above the summits of those in the foreground.
This view, while it assured us that the land we had named after our
monarch must be of great extent, stimulated our impatience to know its
extent, and the nature and relation of its constituent parts. The
Wüllersdorf Mountains were the extreme limits of what could be known
for the present, and their three peaks glowed in the setting sun above
the dark edges of the terraces of the Sonklar-Glacier, whose broad
terminal front over-hung the frozen bay of Nordenskjöld Fiord. It was
eight o’clock in the evening when we returned to our tent, not, however,
before we had made suitable preparations for the observation of the
movement of the glacier. Sumbu and Torossy were our companions; but
we had to tie them with a rope both in going up and coming down, and
we ourselves only mastered the great steepness of the cone of the
mountain by steps which Klotz, who went on before, hewed with
incomparable dexterity and precision in the ice. During the night the
temperature fell to 46° below zero (C.) (-47° F. in the ship), and I do not
believe that we could have passed through it without the help of grog.
We drank it as we lay close together muffled up in our sleeping bag. It
was boiling hot, and so strong, that under other circumstances it must
have made us incapable of work, yet in spite of the grog, we suffered
much all through the night from cold and our frozen clothes.

CHAPTER V.
THE COLD.

1. THE coldest day we had during this expedition was the 14th of
March. By six o’clock on the morning of that day the Tyrolese and I
stood on the summit of the precipitous face of the Sonklar-Glacier. The
others remained behind to clear the tent of snow, and to bury a small
depôt of provisions in an iceberg which was close at hand. The sun had
not yet risen, though a golden gleam behind the glaciers of Salm Island
indicated his near approach. At last the sun himself appeared, blood-
red, glowing with indistinct outline through the mists, and surrounded
with parhelia, which generally occur when the cold is great. The tops of
the high snowy mountains were first touched with rosy light, which
gradually descended and spread over the icy plains, and the sun like a
ball of fire shone at length clearly through the frosty mist, and
everything around seemed on fire. As the sun even at noon was but a
few degrees above the horizon, this wonderful colouring lasted
throughout the day, and the mountains, whose steepest sides were
covered with a frosty efflorescence, shone like glass in this radiant light.
The alcohol thermometer soon after we came on the glacier fell to 59°
1′ (F.) below zero,[34] and a light breeze blowing from the interior, which
would have been pleasant enough on a March day in Europe, exposed
me, while engaged in the indispensable work of drawing and measuring,
to such danger, that though I worked under the shelter of my Tyrolese
companions as a protection against the cold, I was constantly compelled
to rub my stiffened and benumbed hands with snow. We had taken
some rum with us, and as each took his share, he knelt down and
allowed another to shake it into his mouth, without bringing the metal
cup in contact with his lips. This rum, though it was strong, seemed to
have lost all its strength and fluidity. It tasted like innocent milk, and its
consistence was that of oil. The bread was frozen so hard that we
feared to break our teeth in biting it, and it brought blood as we ate it.
The attempt to smoke a cigar was a punishment rather than an
enjoyment, because the icicles on our beards always put them out, and
when we took them out of our mouths they were frozen. Even the
shortest pipes met the same fate. The instruments I used in surveying
seemed to burn when I touched them, and the medals which my
companions wore on their breasts felt like hot iron.

ON THE SONKLAR-GLACIER.

2. The phenomena of cold which we had the opportunity of observing

during this journey, and which I immediately recorded, will perhaps
justify a short break in my narrative while I attempt to describe them.
The horrors of a Scythian winter are an ancient belief, and it used to be
counted wisdom to shun the zones where men were frozen, as well as
the zones where men were scorched. But it has been assumed, with
great exaggeration, that a hot climate makes men sensual and timid,
while a cold climate renders them virtuous and bold. There is far more
truth in the opinion held by some observers, and especially by Polar
navigators, that cold is depressing in its influence, and enfeebles the
powers of the will. At first it stimulates to action, but this vigour is
quickly followed by torpidity; exertion is soon succeeded by the desire to
rest. Persons exposed to these alternations of increased action and
torpor feel as if they were intoxicated. From the stiffness and trembling
of their jaws they speak with great effort, they display uncertainty in all
their movements and the stupor of somnambulists in their actions and
thoughts. Most of the circumpolar animals escape, as much as they can,
the horrors of the frost: some migrate; others, burying themselves in
holes, sleep throughout the winter. The fish, which are found in the
small pools of sweet water on the land are frozen in when these pools
freeze, and awake to life and movement again only when the pools are
thawed.
3. The human body, with an inner warmth amounting to 95°-100° F.,
is exposed in the wastes of North America and Siberia to frightful cold,
the extremes of which have been noted by many different observers.
Back recorded in Fort Reliance, Jan. 17, 1833, the temperature -67° F.;
Hayes, March 17, 1861, -69° F.; Nevérow, in Jakutzk, Jan. 31, 1838,
-74° F.; Kane, -69° F.; Maclure, Jan. 1853, -73° F.; John Ross, 1831,
-56° F.; and Parry, 1821, -55° F.; while the lowest temperature which
has hitherto been observed in the Alpine countries of Europe is only -24°
F. In consequence of the difficulty of observing the extremes of cold,
lower temperatures than these can scarcely ever have been registered.
4. In order to illustrate the effect of an extraordinarily low
temperature on the human frame, the best point to start from is the
imagination of a man exposed without clothes to its influence. At 37° or
50° (C.) of cold a misty halo would encompass him, the edges of which
would have, under certain circumstances, the colours of the rainbow. It
is evident that the moisture of the body rapidly coming forth and
becoming visible in the cold air would cause this mist, which would
decrease with the heat of the body, and disappear on the death of the
frozen man. The purpose of clothing is to counteract as much as
possible this twofold loss of warmth and moisture, which is the principal
cause of the fearful Arctic thirst. But even clothed men exposed to so
low a temperature present a strange appearance. When they are
dragging a sledge on the march their breath streams forth like smoke,
which is soon transformed into a mass of needles of ice, almost hiding
their mouths from view; and the snow on which they tread steams with
the heat which it receives from the snow beneath. The countless crystals
of ice, which fill the air and reduce the clearness of day to a dull yellow
twilight, make a continual rustling noise; their fall in the form of fine
snow-dust, or their floating as frosty vapour, is the cause of that
penetrating feeling of damp which is so perceptible when the cold is
intense, and which receives accretions from the vapours issuing from
the open places of the sea. Notwithstanding all this, there is an
indescribable dryness in the atmosphere, strongly contrasting with the
feeling of dampness. Heavy clouds are impossible; the heavens are
covered only by mists, through which the sun and the moon,
surrounded by halos, glow blood-red. Falls of snow, as we understand
the expression, altogether cease; the snow crystals, under the influence
of cold, are so minute as to be almost invisible. The land, the real home
and source of cold, acts as the great condenser of vapour, and snow and
moisture of every kind, and lies under a deep covering of frozen snow
till the colour of its walls and precipices reappears in April. The soil, in
the stricter sense of the word, is frozen as hard as iron wherever it
appears through the snow, and the mean temperature of Franz-Josef
Land (about 3° F.) makes it highly probable, that the frost penetrates to
the depth of a thousand feet. Great cold, calm weather, and clear
atmosphere combined, are the characteristics of the interior of Arctic
countries. The nearer we approach the sea, the rarer is this
combination. Light breezes sometimes occur with a temperature 37° (C.)
below zero,[35] but the atmosphere is then less transparent.
5. It is well known that sound is propagated far more freely in Polar
regions than with us. When the cold was great, we could hear
conversations, carried on in the usual tone of voice, distinctly at the
distance of several hundred paces. Parry and Middendorf both assert
that the voice is more audible at a distance in cold weather. The
propagation of sound seems to find less hindrance from the irregular
masses of ice and cushions of snow, than from the curtains of our
woods and the carpets of our vegetation. In the mountainous districts of
Europe many of the characteristics of Polar regions, besides intense
cold, are met with; yet it is a fact, that the report of a gun can scarcely
be heard in those situations. Cold, however, can scarcely be regarded as
the essential condition of this phenomenon; for the propagation of
sound, though in a less striking degree, may be observed even in the
summers there.[36] It would seem rather that the amount of moisture in
the atmosphere has a more decided influence in the production of this
phenomenon.
6. When the snow becomes hard as rock, its surface takes a granular
consistence like sugar. Where it lies with its massive wreaths frozen in
the form of billows, our steps resound, as we walk over them, with the
sound as of a drum. The ice is so hard that it emits a ringing sound;
wood becomes wonderfully hard, splits, and is as difficult to cut as
bone; butter becomes like stone; meat must be split, and mercury may
be fired as a bullet from a gun.[37]
7. If cold thus acts on things without life, how much more must it
influence living organisms and the power of man’s will! Cold lowers the
beat of the pulse, weakens the bodily sensations, diminishes the
capacity of movement and of enduring great fatigue. Of all the senses,
taste and smell most lose their force and pungency, the mucous
membrane being in a constant state of congestion and excessive
secretion. After a time a decrease of muscular power is also perceptible.
If one is exposed suddenly to an excessive degree of cold, involuntarily
one shuts the mouth and breathes through the nose; the cold air seems
at first to pinch and pierce the organs of respiration. The eyelids freeze
even in calm weather, and to prevent their closing we have constantly to
clear them from ice, and the beard alone is less frozen than other parts
of the body, because the breath as it issues from the mouth falls down
as snow. Snow-spectacles are dimmed by the moisture of the eyes, and
when the thermometer falls 37° (C.) below zero they are as opaque as
frost-covered windows. The cold, however, is most painfully felt in the
soles of the feet, when there is a cessation of exercise. Nervous
weakness, torpor, and drowsiness follow, which explains the connection
which is usually found between resting and freezing. The most
important point, in fact, for a sledge party, which has such exertions to
make at a very low temperature, is to stand still as little as possible. The
excessive cold which is felt in the soles of the feet during the noon-day
rest is the main reason why afternoon marches make such a demand on
the moral power. Great cold also alters the character of the excretions,
thickens the blood, and increases the need of nourishment from the
increased expenditure of carbon. And while perspiration ceases entirely,
the secretion of the mucous membranes of the nose and eyes is
permanently increased, and the urine assumes almost a deep red colour.
At first the bowels are much confined, a state which, after continuing for
five and sometimes eight days, passes into diarrhœa. The bleaching of
the beard under these influences is a curious fact.
8. Although theoretically, the fat endure cold better than the lean, in
reality this is often reversed. Somewhat in the same way it might be
argued that the negro would have an advantage over the white man, for
the former as a living black bulb thermometer is more receptive of the
warmer waves of heat. But blackening the face or smearing the body
with grease are experiments which could only be recommended by
those who have never been in a position to try them. The only
protection against cold is clothing carefully chosen, and contrivances to
avoid the condensation of moisture. All articles of dress are made as stiff
as iron by the cold. If one puts off his fur coat and lays it down for a few
minutes on the ground, he cannot put it on again till it be thawed. The
fingers of woollen gloves become as unpliable as if they belonged to
mailed gauntlets, and therefore Arctic travellers, except when engaged
in hunting, prefer to use mittens.
9. Constant precautions are needed against the danger of frost-bite,
and the nose of the Arctic voyager especially becomes a most serious
charge. But no sooner has its safety been secured, than the hands
which have rubbed it with snow are threatened with the same fate. The
ears, however, are well protected from frost by the hood. Frost-bite,
which is caused by the stoppage of blood in the capillaries, evinces itself
by a feeling of numbness, which, if not immediately attended to,
increases to a state of complete rigidity. Slight cases are overcome by
rubbing the part affected with snow. When the cold is excessive, feeling
accompanied with a prickling sensation only returns after rubbing for
hours. Under all circumstances, freezing water with an infusion of
hydrochloric acid is the best means of restoring circulation. When the
frost-bitten member is immersed in this, it is at once overspread with a
coating of ice, but as the temperature of the water slowly rises the
frozen limb is gradually thawed. The longer persons are exposed to a
low temperature, the greater becomes their sensitiveness under it. Their
noses, lips and hands swell, and the skin on those parts becomes like
parchment, cracks, and is most sensitive to pain from the least breath of
wind. In cases of neglected frost-bite, the violet colour of a nose or
hand is perpetuated, in spite of all the efforts made to banish it. Frost-
bites of a more severe character will not yield to mere rubbings with
snow, but should be treated with the kind of cold bath we have
described, continued for some days. The formation of blisters, the
swelling of the parts affected, great sensitiveness and liability to a
recurrence of the malady, are the consequences. In many cases a
sensitiveness to changes of temperature lasts for several years.
Amputation is inevitable in severe and neglected cases. When circulation
has been restored, a mixture of iodine and collodion—10 grains to an
ounce—may, according to the experience of Dr. Kepes, be
advantageously applied to reduce the inflammation which generally
results.
10. It is remarkable that great heat as well as great cold should
generate the great evil—thirst. It is also remarkable how rapidly the
demoralisation produced by thirst extends when any one of the party
begins to show signs of suffering from it. Habit, however, enables men
to struggle against thirst more successfully than against hunger. Many
try to relieve it by using snow; which is especially pernicious when its
temperature falls considerably below the point of liquefaction.
Inflammation of the mouth and tongue, rheumatic pains in the teeth,
diarrhœa, and other mischiefs, are the consequences, whenever a party
incautiously yields to the temptation of such a momentary relief. It is in
fact a mere delusion, because it is impossible to eat as much snow—say
a cubic foot—as would be requisite to furnish an adequate amount of
water. Snow of a temperature of 37° to 50° (C.) below zero feels in the
mouth like hot iron, and does not quench, but increases thirst, by its
inflammatory action on the mucous membranes of the parts it affects.
The Eskimos prefer to endure any amount of thirst rather than eat snow,
and it is only the Tschuktschees who indulge in it as a relish with their
food, which is always eaten cold. Snow-eaters during the march were
regarded by us as weaklings, much in the same way as opium-eaters
are. Catarrhs of every kind are less frequent in Polar expeditions, and
the chills to which we are exposed by passing suddenly from the cold of
the land journey to the warmer temperature of the ship, have no evil
consequences. It deserves to be investigated whether this arises from
the difference of the amount of ozone in the atmosphere of the
respective latitudes.—Now let us return to our journey.
11. After crossing over the Sonklar-Glacier and measuring its slight
inclination of 1° 6′, we climbed an elevation to ascertain the most
promising route for penetrating in a northerly direction; and none
seemed better suited than that which lay over its back, which seemed
free from crevasses. But we looked in vain for the fancied paradise of
the interior, which had existed only in our desire to clothe in glowing
colours the Land, from which we had been so long held back. The true
character, however, of Kaiser Franz-Josef Land, so far as it could be
explored in this and the following sledge expeditions, will be the subject
of the next chapter. The accompanying sketch represents a block of
snow, about the height of a man, at the foot of the Sonklar-Glacier, to
which the winds had given a fanlike shape. In the afternoon, after
inspecting the stakes which we had fixed for measuring the motion of
the glacier, we came back to the tent and began our return march to
Cape Tegetthoff and the ship. A cutting wind compelled us to make
constant efforts against frost-bites. With a heavy creaking noise the
sledge was dragged over the hard snow, and to our reduced strength it
seemed to be laden with a double load. The night is generally the
hardest part of such expeditions, and our camping out during the night
under the cliffs of Cape Tegetthoff was especially bitter. Happy was he
who, exhausted by the labour of dragging, fell asleep at once. As usual,
we dug a deep hole in the snow and loosened it as much as possible, so
that we might profit by its property of being one of the worst conductors
of heat. In a short time the inside of the tent was covered with rime
frost, and we ourselves with ice. The tongue only seemed to recover its
former mobility with those who bewailed their loss of knives, stockings,
gloves—yea, of everything, even their place in the tent. They ate their
portion of bear’s flesh much as if they had been chloroformed, and
dropping asleep in their stiffened icy coat of mail, they were awoke by
its gradual thawing, to reiterate without cessation how cold it was; a
fact which no one present was prepared to dispute. The alcohol
thermometer stood at -56° F. (-48° on board the ship), and when the
warmth produced by the exercise we had taken and by the effects of
supper was gone, the feeling of cold was so intense that it seemed far
more probable that we should be frozen to death than that we should
sleep. The cook therefore received orders to brew some strong grog,
and forthwith six spirit-flames burnt under the kettle filled with snow;
but to make snow of such extreme coldness boil quickly we should have
had to place the kettle over Vesuvius itself in the height of an eruption.

BLOCK OF SNOW.

12. We now slept without stirring a limb, and about five o’clock in the
morning of the 15th of March we started to compass the twenty miles
which lay between us and the ship in one march, without encountering
the suffering of another night’s camping out in the snow. The weather
was as clear as it is possible to be at a temperature of -52° F., and going
along with a light breeze from the north, we made use of our sledge sail
to such advantage that we reached the gentle ascent of the west point
of Wilczek Island after a march of seven hours. We formed a second
depôt of provisions on the summit of a rocky promontory, whence we
discerned with a telescope the masts and yards of the ship lying behind
an iceberg, and our fears and anxieties lest it should have drifted away
in our absence were dissipated by this glad view. Our return to the ship
could no longer be a matter of choice; it had become a necessity. Lettis
had been unable for some days to take any share in the labour of
dragging, and walked along in shoes made of reindeer hide, on account
of his frost-bitten feet. Haller also wore similar shoes to save his swollen
feet; Cattarinch’s face was frost-bitten, and he too suffered from
lameness; Pospischill, who could no longer wear his shrunk-up fur coat,
so suffered from frost-bite in both hands, that I sent him on to the ship,
that he might have the help of the doctor as soon as possible. It was
with much effort that we made the last six hours’ march; and when at
length, stiff with ice, we passed between the hummocks that lay around
the ship, Weyprecht, Brosch, Orel, and eight sailors came to meet us,
who, alarmed at the inability of Pospischill to speak in answer to their
questions, had set out from the ship in order to find us.

THE BURIAL OF KRISCH.

13. As I entered my berth I heard the hard breathing of our poor

comrade Krisch. For more than a week he had lain without
consciousness; yet death had not come to relieve him. On the afternoon
of the 16th of March a sudden cessation of all sound told us that he was
no more! Next day, his body, placed in a coffin, was brought on deck,
and our flag hoisted half-mast high. On the 19th, when the thermometer
was at -13° F., the body was committed to its lonely grave in the far
north. A mournful procession left the ship, with a sledge, on which
rested the coffin covered with a flag and cross, and wended its way to
the nearest elevation on the shore of Wilczek Island. Silently struggling
against the drifting snow, we marched on, dragging our burden through
desolate reaches of snow, till we arrived, after a journey of an hour and
a half, at the point we sought on the island. Here, in a fissure between
basaltic columns, we deposited his earthly remains, filling up the cavity
with stones, which we loosened with much labour, and which the wind,
as we stood there, covered with wreaths of snow. We read the prayer
for the dead over him who had shared in our sufferings and trials, but
who was not destined to return home with us with the news of our
success; and close by the spot, surrounded with every symbol of death
and far from the haunts of men, we raised as our farewell a simple
wooden cross. Our sad and solemn task done, there rose in our hearts
the thought, whether we ourselves should be permitted to return home,
or whether we too should find our resting-place in the unapproachable
wastes of the icy north. The wind blowing over the stiff and stark
elevation where we stood, covered us all with a thick coating of snow,
and caused the appearance of frost-bite in the faces and hands of some
of our party. The decoration of the grave of our comrade with a suitable
inscription was therefore deferred till the weather proved more
favourable. We found considerable difficulty in returning to the ship
through an atmosphere filled with snow.[38]

CHAPTER VI.
A GENERAL DESCRIPTION OF KAISER FRANZ-JOSEF LAND.

In now presenting a general view of those parts of Kaiser Franz-Josef

Land which were explored by us, I must be allowed to anticipate the
order of my narrative which describes the subsequent sledge
expeditions, by which our knowledge of the discovered country was so
considerably enlarged.
1. The country, even in its already ascertained extent, is almost as
large as Spitzbergen, and consists of two main masses—Wilczek Land on
the east, and Zichy Land on the west, between which runs a broad
sound called Austria Sound, extending in a northerly direction from Cape
Frankfort till it forks at the extremity of Crown-Prince Rudolf’s Land, 80°
40′ N. L. One branch of it, a broad arm running to the north-east—
Rawlinson Sound—we traced as far as Cape Buda-Pesth. Wilczek and
Zichy Lands are both intersected by many fiords, and numerous islands
lie off their coasts.
2. A continuous surface of ice extends from the one land to the other.
At the time of our exploration, this expanse was formed of ice, for the
most part not more than a year in growth, but crossed in many places
with fissures and broad barriers of piled-up ice. Throughout its whole
extent we saw many icebergs, which we never did in the Novaya Zemlya
seas; whence it is to be inferred that they sail away in a northerly
direction.[39] Our track lay over this ice-sheet. As long as it remains
unbroken, every fiord might serve as a winter harbour; but if it should
break up, not a single locality suitable to form one presented itself along
the coasts we visited, which had no small indentations.[40]
3. The map of this country, which we present, was designed and
constructed from fifteen observations of latitude, from many
observations made with the azimuth compass, from drawings, and from
a system of triangulation, which, from the nature of the circumstances
under which it was formed,[41] makes no pretensions to absolute
exactitude. The heights of the mountains were determined by the
aneroid barometer. Near the ship a base of 2170·8 metres was
measured by Weyprecht and Orel, and connected trigonometrically with
the nearest promontories. This work of theirs formed the basis of my
surveys.
4. It has always been a principle and a practice with Arctic explorers
to name their discoveries either after the promoters of their special
expeditions, or after their predecessors in the work of discovery. Though
they are never likely to become important to the material interests of
mankind, the naming the lands we discovered after those who promoted
our expedition, was, we considered, the most enduring form by which
we could express our gratitude for their efforts in furtherance of a great
idea. The localities, I may add, were named during the work of
surveying.
 5. As I have had the privilege of visiting all the Arctic lands north of
the Atlantic, I have been able to compare them and observe their
resemblances as well as their differences. West Greenland is a high
uniform glacier-plateau; East Greenland is a magnificent Alpine land with
a comparatively rich vegetation and abundant animal life. How and
where the transition between these opposite characters takes place in
the interior is as yet utterly unknown. We may form some notion of
Spitzbergen and Novaya Zemlya, if we imagine a mountain-range, like
that of the Oetzthal with its glaciers, rising from the level of the sea, if
that level were raised about 9,000 feet. There is more softness,
however, in both these countries than is usual in the regions of the high
north. But Franz-Josef Land has all the severity of the higher Arctic
lands; it appears, especially in spring, to be denuded of life of every
kind. Enormous glaciers extend from the lofty solitudes of the
mountains, which rise in bold conical forms. A covering of dazzling
whiteness is spread over everything. The rows of basaltic columns,
rising tier above tier, stand out as if crystallized. The natural colour of
the rocks was not visible, as is usually the case: even the steepest walls
of rock were covered with ice, the consequence of incessant
precipitation, and of the condensation of the excessive moisture on the
cold faces of the rock. This moisture in a country whose mean annual
temperature is about 3° F., seems to indicate its insular character, for
Greenland and Siberia are both remarkable for the dryness of their cold,
and it was singular that even north winds occasioned a fall of
temperature in Franz-Josef Land. In consequence of their enormous
glaciation, and of the frequent occurrence of plateau forms, the new
lands recalled the characteristic features of West Greenland, in the lower
level of the snow-line common to both, and in their volcanic formation.
Isolated groups of conical mountains and table-lands, which are peculiar
to the basaltic formation, constitute the mountain-system of Franz-Josef
Land; chains of mountains were nowhere seen. These mountain forms
are the results of erosion and denudation; there were no isolated
volcanic cones. The mountains, as a rule, are about 2,000 or 3,000 feet
high, except in the south-west, where they attain the height of about
5,000 feet.
6. The later Arctic expeditions have established the existence of vast
volcanic formations in the high north, and of very recent deposits in
their depressions. In fact, a vast volcanic zone seems to extend from
East Greenland, through Iceland, Jan Mayen and Spitzbergen, to Franz-
Josef Land. The geological features of the latter are at any rate in
harmony with those of North-east Greenland. The tertiary Brown-coal
sandstone of East Greenland is also found in Franz-Josef Land, though
Brown-coal itself is met with only in small beds, which, nevertheless,
may be reckoned among the many indications that the climate of Polar
lands must once have been as genial as the climate of Central Europe at
the present day. The kind of rock which predominates is a crystalline
aggregation called by the Swedes “Hyperstenite” (Hypersthene),
identical with the Dolerite of Greenland; but the Dolerite of Franz-Josef
Land is of a coarser-grained texture, and of a dark yellowish green
colour; according to Professor Tschermak (the Director of the Imperial
Mineralogical Museum at Vienna), it consists of Plagioclase, Augite,
Olivine, titaniferous Iron and ferruginous Chlorite. The mountains of this
system forming table-lands, with precipitous rocky sides, give to the
country we discovered its peculiar physiognomy.
7. The Dolerite of Franz-Josef Land greatly resembles also the Dolerite
of Spitzbergen. After the return of the expedition I saw in London some
photographic views of the mountains of North-East Land, Spitzbergen,
taken by Mr. Leigh-Smith, and I was at once struck with the
resemblance between their forms and those of Franz-Josef Land. I learnt
also from Professor Nordenskjöld, the celebrated explorer of
Spitzbergen, as I passed through Sweden, that the rock of North-East
Land was this same Hyperstenite (Hypersthene). Hence the geological
coincidence of Spitzbergen and Franz-Josef Land would seem to be
established; and this geological affinity, viewed in connection with the
existence of lands more or less known, appears to indicate that groups
of islands will be found in the Arctic seas on the north of Europe, as we
know that such abound in the Arctic seas of North America. Gillis’ Land
and King Karl’s Land are, perhaps, the most easterly islands of the
Spitzbergen group; for it is not probable that these and the lands we
discovered form one continuous uninterrupted whole.
8. Amygdaloids, so common in Greenland, were never found by us in
Franz-Josef Land; and while the rocks in the southern portions of the
country were often aphanitic and so far true basalt, in the north they
were coarse-grained and contained Nepheline. The other rocks consisted
of a whitish quartzose sandstone, with a clayey cement, and of another
finely-grained sandstone, containing small granules of quartz and
greenish-grey particles of chlorite, and also of yellowish finely-laminated
clay slate. Erratics, so far as my opportunities permitted me to judge,
were of rare occurrence; but we found many smaller pieces of petrified
wood, allied to lignite.
9. Some of the islands of the Spitzbergen and Franz-Josef Land group
must be of considerable extent, because they bear enormous glaciers,
which are possible only in extensive countries. Their terminal precipices,
sometimes more than 100 feet high, form generally the coast-lines. The
colour of all the glaciers we visited inclined to grey, we seldom found the
dull green-blue hue; the granules of their ice were extraordinarily large;
there were few crevasses; and the moraines were neither large nor
frequent. Their movement was slow; and the snow-line commences at
about 1,000 feet above the level, whereas on the glaciers of Greenland
and Spitzbergen the like limit is generally 2,000 or even 3,000 feet, and
in these countries also, all below that line is free from snow in summer.
Franz-Josef Land, on the contrary, appears even in summer to be buried
under perpetual snow, interrupted only where precipitous rock occurs.
Almost all the glaciers reach down to the sea. Crevasses, even when the
angle of inclination of the glacier is very great, are much less frequent
than in our Alps, and in every respect the lower glacier regions of Franz-
Josef Land approach the character of the névés of our latitudes. There
only was it possible to determine the thickness of the annual deposits of
snow and ice. In these lower portions, the layers were from a foot to a
foot-and-a-half thick; fine veins, about an inch wide, of blue alternating
with streaks of white ice ran through them, which occurred with peculiar
distinctness at the depth of about a fathom. On the whole, this peculiar
structure of alternating bands or veins was not so distinctly marked as it
is in the glaciers of the Alps, because the alternations of temperature
and of the precipitations are very much less in such high latitudes.
10. The glacier ice of Franz-Josef Land was far less dense than the
glacier ice of East Greenland; whence it appears that movement, as a
factor in the structure of the glacier, predominates in Franz-Josef-Land
more than the factor of regelation. Even at the very end of the glaciers,
granules an inch long are distinctly traceable in its layers, and in the
névé region especially the glacier ice is exceedingly porous. The great
tendency of the climate of Franz-Josef Land to promote glaciation is
manifested in the fact, that all the smaller islands are covered with
glaciers with low rounded tops, so that a section through them would
present a regular defined segment of a circle; hence many ice-streams
descending from the summits of the plateaus spread themselves over
the mountain-slopes and need not to be concentrated in valleys and
hollows in order to become glaciers. Yet many glaciers occur—the
Middendorf Glaciers, for example—whose vertical depth amounts to
many hundred feet. Their fissures and the height of the icebergs show
this. It was unfortunately impossible for us to explore the Dove Glacier,
the largest of all we saw, owing to its great distance from the line of our
route. Evaporation from the surface of the glacier goes on with great
intensity during those summer months when the daylight is continual,
and deep water-courses show that streams of thaw-water then flow over
it.
11. The comparison of the temperature of the air within the crevasses
of the glaciers with the external air, invariably proved, that within the
crevasses the temperature was higher. The traces of liquefaction in the
glacier during winter, arising from the warmth of the earth, could not be
observed, because the sides and under-edge of the glaciers were
inaccessible from the enormous masses of snow, and the icicles of the
terminal arches and precipices could be ascribed only to the freezing of
the thaw-water of the preceding summer.
12. The plasticity of the glaciers was so great, that branches of them,
separated by jutting-out rocks, flowed into each other again at their
base, without showing any considerable crevasses. We could only in a
few cases judge of their movement by direct measurement, and we had
never more than one day to test it. One observation made on the
Sonklar Glacier in the month of March did not seem to support the
notion of the advance of the glaciers; but the repetition of similar
experiments, some weeks later, made on two glaciers on the south of
Austria Sound, gave the mean of two inches as the daily movement. It is
very probable that their movement begins in the Arctic regions
somewhat later than in our latitudes, perhaps at the end of July or
beginning of August, because the period of the greatest liquefaction
then ends, while it is at its minimum in March and the beginning of April.
The signs of glacier-movement were apparent in the detachment of
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