Question

1.A 12-year bond has a 9 percent annual coupon, a yield to
maturity of

11.4 percent, and a face value of $1,000. What is the price of the
bond?

2.You just purchased a $1,000 par value, 9-year, 7 percent annual coupon bond that pays interest on a semiannual basis. The bond sells for $920. What is the bond’s nominal yield to maturity?

a. 7.28%

b. 8.28%

c. 9.60%

d. 8.67%

e. 4.13%

f. None of the above

3.A bond with 10 years to maturity has a face value of $1,000. The bond pays an 8 percent semiannual coupon, and the bond has a 9 percent nominal yield to maturity. What is the price of the bond today?

a. $908.71

b. $934.96

c. $935.82

d. $952.37

e. $960.44

f. None of the above

4.Interest rate risk is associated with the bonds price variability given a change in the interest rates.

Suppose you have BOND A, which is a 30 year zero coupon bond and BOND B, which is a 5 year 10% coupon bond. If interest rates (YTM) change from 8% to 7% the bonds will increase in value. Suppose BOND A's price changes from $99.38 to 129.64 and the 5 year 10% coupon bond price changes from $1079.85 to $1123.01. Which bond has the greatest percentage increase in value? Record the percentage increase in value of the bond with the highest percentage change below. Write the increase as a decimal, so a 5% increase would be written as 0.0500.

5.A corporate bond that matures in 12 years pays a 9 percent annual coupon, has a face value of $1,000, and a current price of 980. The bond can first be called four years from now. The call price is $1,050. What is the bond’s yield to call?

a. 10.01%

b. 5.36%

c. 10.71%

d. 11.86%

e. None of the above

6.The current price of a bond is 800, next year the price will be 880. The bond pays a $20 annual coupon. What is the current yield, capital gains yield and total return?

a. 10%, 2.5%, and 12.5%

b. 10%, 2.27%, and 12.27%

c. 2.5%, 2.27%, and 12%

d. 2.5%, 10%, and 12.5%

e. none of the above

7.What is the total return to an investor who purchases a bond for $1000 and sells the bond for $1,054 next year. Assume the bond has an annual coupon rate of 4% that is paid in two equal payments.

Record your answer as a decimal to four places after the decimal, so if your answer is 4.212111%, record your answer as 0.0421.

8.A 7-year bond has a 8 percent coupon rate with the interest paid in semi annual payments. The yield to maturity of the bond is 12.9 percent, and a face value of $1,000. What is the price of the bond?

9.A 9-year zero coupon bond has a yield to maturity of

6.6 percent, and a par value of $1,000. What is the price of the bond?

10.Interest rate risk refers to the fluctuations in bond prices due to a change in market interest rates. Bonds with ________ time to maturity experience a ________ change in price.

a. longer; smaller.

b. shorter; larger.

c. longer; greater.

d. shorter; greater.

e. Statements c and d are correct.

11.A bond with 10 years to maturity has a face value of $1,000. The bond can be called in four years for $1050. The bond pays an 6 percent semiannual coupon, and the bond has a 1.3 percent nominal yield to maturity. What is the price of the bond today assuming that it will be called?

Answer #1

1. Interest paid by bond = 9%*$1,000 = $90

Present Value of the bond = Present value of 1 in 12 years when YTM is 11.4% * Face Value = 0.2738*1,000 = $273.8

Present value of interest payments = Present value of an ordinary annuity of 1 at 11.4% for 12 years * Interest paid

= 6.3705 * $90 = $573.35

Price of bond = Present Value of bond + Present value of interest payments = $273.8+$573.35 = $847.15

2. Interest paid by bond = 7.5% of 1,000 = $70

Price of bond = PVIF(YTM%,9)*1,000 + PVIFA(YTM%,9)*70

920 = PVIF(YTM%,9)*1,000 + PVIFA(YTM%,9)*70

Applying each option, YTM comes to 8.28%

Answer is b. 8.28%

1. A 9-year zero coupon bond has a yield to maturity of
11.8 percent, and a par value of $1,000. What is the
price of the bond?
2. A 7-year bond has a 8 percent coupon rate with the interest
paid in semi annual payments. The yield to maturity of
the bond is 2.3 percent, and a face value of
$1,000. What is the price of the bond?
3. A 12-year bond has a 9 percent annual coupon, a yield to
maturity of...

Rex Healthcare recently issued a bond with a 30-year maturity,
an annual coupon rate of 10 percent, a face value of $1,000, and
semiannual interest payments. If the current rate of interest is a
9 percent yield to maturity on this investment, what is the current
price of the bond?

1. A Treasury bond has a 10% annual coupon and a 10.5%
yield to maturity. Which of the following statements is CORRECT?
*
a. The bond sells at a price below par.
b. The bond has a current yield less than 10%.
c. The bond sells at a discount.
d. a & c.
e. None of the above
2. J&J Company's bonds mature in 10 years, have a par value of
$1,000, and make an annual coupon interest payment of...

A bond with 10 years to maturity has a face value of $1,000. The
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percent nominal yield to maturity. What is the price of the bond
today?

soca co. offers a 9 percent coupon bond with semiannual payments
and a yield to maturity of 7.50 percent. The bonds mature in 18
years. What is the market price of a $1,000 face value bond?

You buy an 8 percent coupon, 10-year maturity bond when its
yield to maturity is 9 percent. One year later, the yield to
maturity is 10 percent. Assume the face value of the bond is
$1,000.
(a) What is the price of the bond today?
(b) What is the price of the bond one year later?
(c) What is your rate of return over the one-year holding
period?

Milner's Tools has a 9-year, 7 percent annual coupon bond
outstanding with a $1,000 par value. Carter's Tools has a 10-year,
6 percent annual coupon bond with a $1,000 par value. Both bonds
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yield increases to 6.75 percent,
(1) What is the percentage change in Milner’s bond value?
(2) What is the percentage change in Carter’s bond value?
(3) Whose bond has higher interest rate risk? Why?

1. A 3-year annual coupon bond has a yield to maturity of 8%,
coupon rate of 5%. The face value of the bond is $1,000.
a. What is the price of the bond? Is it premium bond or discount
bond?
b. Suppose one year later immediately after you receive the
first coupon payment, the yield to maturity drops to 7%. What would
be your holding period return if you decide to sell the bond at the
market price then?
c....

You just purchased a $1,000 par value, 10-year, 9.3 percent
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A 10-year, 7 percent coupon bond pays interest semiannually. The
bond has a face value of $1,000. What is the percentage change in
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percent from the current rate of 5.5 percent?

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