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
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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,
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(2) What is the percentage change in Carter’s bond value?
(3) Whose bond has higher interest rate risk? Why?

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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
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c....

You just purchased a $1,000 par value, 10-year, 9.3 percent
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